Michael Burrell never asked for a new insurance policy for his Boca Raton home.
Because he lives east of Interstate 95, an area where few private property insurers are willing to tread, Burrell assumed no company other than state-backed Citizens Property Insurance Corp. would cover the wind risk on his three-bedroom, three-bathroom home.
Then in late June, Burrell got a notice in the mail that his coverage was shifting to a different insurer. Last year, his annual premium cost $1,595. This year, it's $4,581 -- a 187 percent increase.
Staying with Citizens wasn't an option. With a private insurance company now offering to cover his home, Burrell couldn't refuse -- no matter the price.
This problem exposes an unintended hitch in Citizens' "takeout program," state insurance officials say, in which private insurers are taking policies from Citizens but charging much more than the state-run home insurer. The law says Citizens is a last resort for homeowners who have no options for private insurance coverage.
Burrell is one of 41,628 Florida homeowners who will be switched this year from Citizens to either Florida Peninsula, a year-old company in Boca Raton, or to Homewise Insurance, a Tampa firm that just started doing business this year.
The two companies are participating in the takeout program, which allows private companies to take homeowner policies from Citizens, now Florida's largest property insurer. Both companies are targeting homes in Citizens' so-called high-risk area, which is generally east of Interstate 95 or U.S. 1 in South Florida.
State Insurance Commissioner Kevin McCarty is aware of the dilemma facing some Citizens' customers.
"By law, they can't go back in [Citizens] so these people are put in this unfortunate situation," said Bob Lotane, a spokesman for the state Office of Insurance Regulation.
The program to encourage private insurers to take Citizens' policies "wasn't planned this way," Lotane said. "We feel terrible about it. The commissioner would like to do something but he's constrained by statute."
McCarty is reviewing options to help affected Florida homeowners, Lotane said, "but as of now, we haven't been able to identify any."
Burrell, 63, is retired and living on disability benefits. "I was so shocked," he said about his bill from Florida Peninsula Insurance Co. "You don't plan on that extra money, which is not a couple of hundred bucks. It's a lot of money."
Florida Peninsula stands to collect $18 million in bonus money from Citizens, provided the company holds onto the more than 80,000 policies for three years, Citizens spokesman Rocky Scott said. In addition to the 9,974 policies it removed from Citizens this year, it took another 75,556 policies in 2005.
Homewise, which took over 31,654 Citizens' policies, isn't seeking any bonus money. The company doesn't want to have to comply with requirements such as having to hold onto policies for a certain amount of time.
Left without a choice
Because Florida Peninsula and Homewise are charging people substantially higher premiums than Citizens, it's caused financial stress for homeowners who now have private insurance coverage for their homes but can't afford it.
The problem reflects "the confluence of unfortunate circumstances," said Jeff Grady, president of the Florida Association of Insurance Agents.
Problem No. 1: While Citizens is required to charge higher rates than those of private insurers, the formula used to determine those rates is an average of the top 20 insurance companies in a given region. Many of those insurers in Broward or Palm Beach counties "haven't written [new insurance policies] in forever," Grady said.
Problem No. 2: Citizens' rates aren't required to be based on the 1-in-100-year chance of a catastrophic storm hitting the state, while private companies' prices are, Grady said.
The result: Homewise and Florida Peninsula have become the only private insurance option for many, and both are more expensive than Citizens, which used to charge the highest rates statewide. These homeowners have no choice because Citizens no longer will cover them nor will other private insurers.
we need to do is change the law and allow the consumer obviously the right
to choose and not make it a regulatory interpretation that says that they
can't," Grady said.