Report: Citizens insures thousands of out-of-state policyholders
09/11/2013 5:38 PM
09/11/2013 8:03 PM
When Citizens Property Insurance sends out its monthly customer bills, only 31 percent of them go to the same house that is insured.
The rest go to other mailboxes in Florida — and around the globe, according to data analyzed by the American Consumer Institute of Citizen Research.
More than 19,000 bills go to people who live in Canada, nearly 27,000 go to New Yorkers, almost 12,000 go to folks in New Jersey and hundreds more go to England, Germany and France.
From Singapore and China, to South Africa and Luxembourg, Florida’s state-run insurance company is providing subsidized insurance coverage to 22,775 property owners who reside abroad. Another 176,465 policies go to homeowners with primary addresses in other states, the study found.
At least 1 million of the nearly 1.3 million monthly bills for homeowners policies stay in Florida, but that includes an estimated 500,000 policies that go to addresses different from the property that is insured.
As Florida grapples with how to lower the cost of homeowners insurance along its hurricane alley, the out-of-state subsidies are a luxury it cannot afford, said Steve Pociask, president of the Washington, D.C.-based think tank that reviewed Citizens’ billing lists.
“It all comes down to affordability,’’ he said. “People who live here and have their primary homes insured here are teachers, police, service workers and they are being stung by higher prices. while 27,000 people who have their bills sent to New York are getting subsidized insurance. Why do we want to subsidize these folks?’’
The inequities are enough to prompt Sen. David Simmons, the chairman of the Senate Banking and Insurance Committee to draft legislation to require that out-of-state policyholders whose second homes or vacation are insured by Citizens no longer receive subsidized rates.
“It is a real issue,’’ said Simmons, R-Maitland. “We thoroughly investigated it. The people who have the wind-only policies in the coastal accounts pay comparitively less than people who have personal accounts who are paying close to actuarially sound rates. It’s grossly unfair.”
Pociask’s findings have also prompted a coalition of business and environmental groups this week to call for legislation to ban property owners whose primary residence is out of state from qualifying for Citizens insurance, which are offered at below-market rates.
“It is bad public policy to continue to allow public subsidies for wealthy, out-of-state homeowners, including coastal homeowners who should be paying a fair price to live in a vulnerable area,’’ said Manley Fuller, president of the Florida Wildlife Federation and a member the Stronger Safer Florida Coalition, whose goal is to reduce the risk of hurricane losses in the wake of a major storm.
The study, produced independently by Pociask using data supplied by Citizens, does not distinguish between policyholders who own or rent their property to full-time residents in Florida but receive their bills out of state, and those who live in Florida only part of the year.
It’s a controversial suggestion in a state where steady improvements in the real estate market are being driven in part by international buyers.
For example, in Sunny Isles Beach, development is under way for eight luxury condominiums, most of which are being marketed to foreign and out-of-state investors. Mayor Norman Edelcup predicts the city’s property tax base will double in the next five years because of it. But, he said, access to property insurance is key.
“If Citizens were to deny insurance coverage to non-resident owners — in effect creating second class citizens — I would be totally against it,” he said.
If those property owners are denied Citizens coverage, and can’t obtain insurance from an alternative carrier, “that would immediately cut those buyers out of the market and that would have a dramatic effect on us,’’ he said.
Legislators tried to impose a surcharge on non-homesteaded property once before, in 2006. But the measure, which was adopted by legislators as part of a sweeping insurance reform bill, was repealed the next year in the wake of spiraling insurance costs at the state-run carrier.
Under the current system, anyone who obtains a Citizens policy faces the risk of being charged additional assessments if the state runs out of money to cover claims in a massive storm. Floridians who don’t carry Citizens coverage would also face fees to bail out the state carrier, leading some to question the fairness of giving out-of-state residents subsidies if they escape the added costs.
“We should not be subsidizing insurance — period — because it distorts risk and it distorts the market,’’ said Christian Camara, Florida state director of the R Street Institute, a free-market think tank. “But we especially should not be subsidizing folks who do not live in Florida and would not be subject to the assessments in a worst-case scenario.”
Efforts to shrink Citizens and reduce the potential size of those assessments was the focus of a major property reform bill passed last session.
Under the plan, Citizens established a clearinghouse to encourage private insurers to take over Citizens plans, limited the maximum Citizens policy from $2 million to $1 million and eliminated subsidizes for new construction in environmentally-sensitive coastal areas.
But Pociask, who said his organization receives no funding from Florida entities, warns that because of the large number of out-of-state policyholders, the reforms may not do enough to ease the financial burden on Florida residents if a massive storm were to hit.
“The whole idea of having that investment from other countries is really good for the state, but, the question is, should somebody else be on the hook for paying for their insurance?’’ he asked.
Simmons said he is prepared to find the answer with legislation next session.
“Our plan is to address the inherent inequities that exist without denying anybody access to Citizens,’’ he said. “But we want to make sure the existing Citizens policyholder are not subsidizing other policyholders who are out of state.”
Mary Ellen Klas can be reached at meklas@MaryEllenKlas and on Twitter @M
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