South Florida homeowners have learned a hard lesson over the years: When the Legislature talks about “reforming” Citizens Property Insurance Corp., it’s time to hold onto their wallets. Sure enough, lawmakers in Tallahassee are at it again this year, and once again South Florida policyholders are in the eye of the storm.
Sen. David Simmons, R-Altamonte Springs, principal author of a contentious overhaul of Citizens that the Senate approved on Thursday by a 24-15 vote, assured his colleagues that, “This bill does not raise rates.” Technically, he’s right. The bill does not mandate a rate increase beyond those raises already in the works.
But there are so many exceptions and loopholes that open the door to inevitable increases for hundreds of thousands of policyholders in the coming years that his claim verges on the brink of a “pants on fire” rating.
New policyholders, for example, are required to pay “actuarially sound” rates — an ill-defined phrase that insurers and consumer advocates don’t agree on. If enacted, this would mean that in some coastal areas rates would have to double to meet the Citizens standard of “actuarially sound.”
The bill also mandates a gradual reduction of Citizens policyholders by denying them coverage and thus forcing them into the private insurance market via a “clearinghouse” that will review policies as they come up for renewal. But if they are subsequently dropped and have to come back to Citizens, they will be exposed to a higher rate (because they are deemed “new” cusomers). Either way, it’s a rate increase.
To get Senate endorsement, the bill was stripped of some of its worst provisions and altered by a 101-page amendment filed on the night before the vote. But it still contains provisions that will unfairly sock it to policyholders in South Florida, from the Keys to Palm Beach, one way or the other.
Coverage limits will be reduced from the current $1 million to $500,000 over five years. With home values rising and coverage limits shrinking, the inevitable result will be the denial of coverage for more and more homeowners.
At this writing, the House of Representatives is considering a “smaller” reform that would be less painful for South Florida homeowners who have Citizens coverage.
It strips most of the provisions of the Senate version, though it keeps the “clearinghouse” provision, and adds better protections for consumers.
It is preferable to the Senate bill, but the larger question is whether Citizens needs any “reform” at all, and why now?
The company has experienced signficant improvements lately in its financial status, such as a record $6 billion surplus. Meanwhile, the private insurance market is expanding rapidly.
The fear of higher assessments on everyone if Citizens can’t pay post-hurricane claims is driving the push for reform. Yet Citizens has reduced its potential liability by 42 percent in the last year and the risk of post-hurricane assessments has fallen significantly.
Furthermore, rates for Citizens policyholders are already on the rise, as noted earlier. Mandated annual rate increases of 10 percent have narrowed the gap between Citizens and average premium costs in the private market.
The issue is too important to South Florida to be decided in the haste of the closing days of the legislative session. At this point, voting No on higher rates is the best course for anyone who wants to protect the interests of Citizens ratepayers in South Florida.