As Citizens Property Insurance Corp., once the state's carrier of last resort, continues to offer coverage to more and more homeowners, a lobbying group took the unusual step Thursday of publicly bashing the state-run company that has turned into Florida's biggest home insurer.
Insurance agents issued a warning to Florida consumers who hope to buy coverage from Citizens: Policyholder beware.
The Florida Association of Insurance Agents cautioned that legislative changes to Citizens' "assessments" - fees charged if claims drain the insurer's reserves - mean that policyholders could be whacked with big bills if major hurricanes hit the state in rapid succession.
Citizens quickly countered the agents' warnings by saying large assessments are unlikely. Spokesman Rocky Scott said such assessments could happen "in theory - and boy, do I emphasize the word theory."
But the insurance agents group, which has about 8,000 members statewide, said homeowners who turn to Citizens for relief from soaring premiums should know that it's not a perfect solution.
Assessments could total 60 percent of the premium for policies on non-homesteaded properties and 30 percent of the insurance bill for homesteaded properties. If you pay Citizens $1,000 a year for coverage, and the insurer is rocked by a flurry of major storms such as the hurricanes that hit Florida in 2004, you could face a $300 assessment on your homesteaded property, the group said.
"If there is a deficit in any account of Citizens, you will pay substantially more in assessments than those insured in the voluntary market, who, in most instances, won't have to pay anything," the insurance agents group wrote in a 10-page report.
For assessments to reach 30 percent, Citizens would have to be hit by a series of storms that would be big enough to drain its coffers but not big enough for it to tap into the Florida Hurricane Catastrophe Fund, the state reinsurance fund that makes payments once claims reach $4 billion.
"Could it happen? Yeah," Scott said. "Could we have a one-in-5,000-year storm? Yes. It's possible but not probable."
State lawmakers last year changed the way Citizens assesses policyholders. Before, red ink at Citizens was mopped up by assessments on every policyholder in the state.
The legislative change shifts the burden of assessments away from everyone in Florida and more squarely onto Citizens' almost 1.4 million policyholders - more than 180,000 of which are in Palm Beach County and the Treasure Coast. Florida Insurance Consumer Advocate Bob Milligan said the agents' study was accurate, but he added that Citizens can offer more peace of mind than the start-up carriers that are taking on new business in Florida.
"If you're with Citizens and there's a big loss, you're going to pay a pretty hefty assessment," Milligan said. "The flip side is that if you go with one of these new, thinly capitalized insurers ... one of them may go belly-up."
That's exactly what happened with Poe Financial Group, a Tampa-based insurer that went broke last year after quickly adding policies in hurricane-prone areas.
As Gov. Charlie Crist has pushed to make Citizens a more viable alternative for homeowners, consumers increasingly are requesting policies from Citizens, said Jeff Grady, president of the insurance agents association.
As a result, he said, agents felt compelled to explain the potential pitfalls of Citizens policies as the insurer opens its rolls to more property owners.
"Customers are asking for Citizens policies by name, and that's not what it used to be," Grady said. "It used to be a last alternative."
In addition to potential assessments, Citizens provides stingier coverage than private insurers, the group said. For instance, Citizens limits contents coverage to half the home's value, and it doesn't offer liability coverage for dog bites or slander lawsuits.
For many Florida homeowners, the differences are meaningless because Citizens is the only insurer available to them. Homeowners who live east of Interstate 95 in southern and central Palm Beach County and east of Alternate A1A in northern Palm Beach County will find windstorm insurance from no other carrier.
The agents' critical report comes a week after Citizens' board of governors agreed to consider cutting commissions to agents, but Grady said this report was being prepared well before that vote.