Property insurance reform was nowhere to be found among Gov. Rick Scott’s “legislative priorities” during this year’s lawmaking session in Tallahassee.
But even as Scott pushed publicly for lawmakers to pass bills on car insurance reform, job creation incentives and education funding, he was working behind the scenes on another significant project: A massive overhaul of Citizens Property Insurance Corp.
The goal? Shrink Citizens drastically without involving the Legislature, which historically has set policy guidelines for the state-run insurer.
“We have to have real solutions, and I, along with everybody else up here, we expect the Citizens board to find them,” Scott told then-Citizens president Scott Wallace during a meeting of the Florida Cabinet last November.
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Wallace had told Scott and other members of the Cabinet that Citizens would need “guidance” from the Legislature in order to make major headwinds. Scott did not address the request, instead telling Wallace and the board to “solve the problem by June of next year before the next hurricane season.”
Wallace resigned a month later, and was replaced by Tom Grady, Scott’s neighbor and political ally.
In the months since that tense meeting and Grady’s appointment, Citizens’ eight-member board has intensified an unprecedented campaign to remake the state-owned insurer in ways typically reserved for the Legislature. For homeowners, it has meant drastic rate hikes, reduced coverage and a rapidly changing insurance marketplace. The insurer recently unveiled — and ultimately abandoned — a plan to unilaterally stop applying the Legislature’s 10-percent cap on rate increases to new customers.
Grady — who supported the plan despite sigificant public outcry — was forced out by the board in June.
“To comply with their marching orders from Tallahassee, the board is looking for any way possible to raise rates that they can without going before the Legislature,” said Sen. Mike Fasano, R-New Port Richey, implying that the governor’s office is directing Citizens from behind the scenes. “They’ve gone way beyond what they should be dealing with.”
Scott did not respond to a request for comment.
Aside from Fasano and a few other elected officials, most lawmakers have remained on the sidelines as the Citizens board has taken on more responsibility and pushed insurance costs higher.
The governor’s decision to reform Citizens without involving the Legislature reflects many of the political realities of governing in Florida during an election year.
Several lawmakers in Scott’s own party — particularly in South Florida — have openly disagreed with the governor and other Republicans over property insurance, a contentious pocketbook issue for voters.
Despite an overwhelming Republican majority in the Florida Legislature, lawmakers have had a hard time reaching a consensus on property insurance reform, which many see as a political minefield in an election year.
In some parts of the state, voting to raise Citizens’ insurance rates can be tantamount to political suicide, and several candidates for office are already facing negative campaign ads highlighting their insurance-related votes.
In the Tampa area, a political group has sent out mailers bashing Rep. Jeff Brandes, R-St. Petersburg, for a vote he cast in favor of a controversial bill to allow unregulated companies to take over Citizens policies.
Brandes, a Senate candidate, is facing a tough primary race against fellow Republican, Jim Frishe, of St. Petersburg. The ad features a frustrated man reading an insurance bill, and slams Brandes for voting for a measure that would potentially raise rates on unsuspecting homeowners.
“Who’s he kidding?” reads the mailer. “Jeff Brandes claims he’s for us. But he would put Bay-area homeowners at greater risk while Big Insurance pockets more profits.”
Citizens’ board — with the blessing of Scott — has been moving to sidestep that kind of political infighting by simply enacting sweeping policy changes on its own.
“I hope you agree with me as an observer that the legislative process is extremely unpredictable,” John Rollins, a board member appointed by Scott, told the rest of the board in November. “We should agree on a package of things we can do absent of the Legislature but with the help of the help of the [Financial Services Commission].”
The Legislature created Citizens 10 years ago to be the insurer of last resort, and elected officials have been responsible for most of the major initiatives at the state-run company. In 2007, when a struggling Citizens needed major reform, lawmakers convened a special session to address property insurance issues. Lawmakers voted to overhaul Citizens and temporarily ban all rate increases, and later placed a 10-percent cap on annual rate hikes.
But because of several policy changes recently enacted by Citizens’ board, that 10-percent cap has not stopped homeowners from seeing premium increases of 50 percent to 100 percent this year.
Earlier this year, the board unveiled a plan to stop applying the 10-percent cap to new customers, allowing rates to increase more aggressively for those who join Citizens next year.
Some lawmakers who enacted the 10-percent cap were outraged by Citizens’ plan, and bashed the insurer for not seeking legislative approval.
Carlos Lopez-Cantera, the Republican majority leader from Miami, tongue-lashed the Citizens board for creating the perception that it can overrule lawmakers’ actions.
“This board may not agree with the policies that come out of the Legislature, but they are the law, whether you agree with them or not,” Lopez-Cantera said during a contentious July meeting with the board.
At least two South Florida lawmakers promised to file a bill next year to block Citizens from removing the cap.
Lacasa, in an interview, denied allegations that the board had overstepped its boundaries.
“There’s absolutely no way that we are attempting to bypass the Legislature,” he said. “Because that would be contrary to the laws that govern us.”
Some lawmakers have shown support for Citizens as it tries to raise rates and shrink in size. In June, 25 state lawmakers wrote an open letter in support of Citizens’ efforts to raise its rates and shrink its rolls.
“We understand and share the desire for lower homeowner’s insurance rates,” the group of 22 state Representatives and three state Senators wrote. “However, Floridians who are currently paying full-price for their insurance in the private market don’t deserve to pay a subsidy for those on Citizens.”
Most of the lawmakers who signed the letter are Republicans from inland parts of North and Central Florida.
More and more, the political divide over Citizens is taking place not across political parties, but between geographical regions. Politicians from inland communities complain they are subsidizing wealthy coastal dwellers, and those in South Florida say high insurance rates at Citizens are slamming their constituents, who have no other options.
“The problem we’re having is a civil war mentality between the North and the South,” said Rep. Frank Artiles, R-Miami. “The North doesn’t want to subsidize the South, but the South pays the taxes for everything else.”
With the debate intensifying, a showdown in the state Legislature next year is likely.
But before the Legislature can act, dozens of changes enacted unilaterally by Citizens board this year will take hold, leaving customers with higher premiums and reduced coverage.