Citizens CEO: Give insurance consumers more choice

Article Courtesy of The Palm Beach Post

By Charles Elmore

Published March 22, 2013

WEST PALM BEACH -- The CEO of Florida’s largest property insurer, Citizens, said a change he wants could help as many as 30 percent of new customers find coverage outside the state-run carrier, while another panelist at a roundtable Wednesday called for state action to address problems spotlighted by reporting in the The Palm Beach Post.

The answers emerged from a hail of questions at the newspaper’s Straight from the Source Roundtable on property insurance, a free event suggested by readers.

The No. 1 change he wants from state legislators, Citizens President and CEO Barry Gilway said, is a new “clearinghouse” to make sure customers are aware of options they may have in the private marketplace before they are sent to Citzens. It’s the state’s biggest insurer with 1.3 million customers.

“Customers don’t get access to the total market,” Gilway said. Under a clearinghouse, he said, “that policy would be shopped to virtually every insurance company in Florida.”

One problem, he said, is agents may be tied to only one or a few insurance carriers and may wind up writing policies with Citizens to keep auto or other business. He mentioned as an example State Farm, which is writing little new property insurance in the state.

The clearinghouse would be designed to improve on the current system but is not a “panacea,” he acknowledged.

In many instance, customers in mobile homes, homes older than 50 years and those near the coast may not have any realistic options besides Citizens, he said. But in his view, perhaps 1,500 out of every 5,000 new policies headed for Citizens may have a real choice of insurers that the customer does not necesarily know about.

It’s perhaps the biggest issue in the legislature right now for agents, said Brian Samberg, president of Southeast Insurance agency in Boca Raton and past president of the Professional Insurance Agents of Florida.

“There are some issues with the details we would like to see worked out,” Samberg said. He said he’s not opposed to the concept but he wants to make sure the results are in the best interests of agents and consumers alike.

The clearinghouse is a “great idea,” said William F. “Chip” Merlin, president of Merlin Law Group, which represents policyholders against insurers and has office in Tampa, West Palm Beach, and other cities.

But another area that could use some attention from regulators and legislators, he said, is business practices one state advocate calls “abusive” at the state’s largest private insurer, Universal Property and Casualty of Fort Lauderdale.

A Post story Wednesday highlighted cases where the insurer accepted premiums for years but denied claims based on items from a customer’s credit history not disclosed on an application, such as old tax lien in another state.

“I bet today now that this is coming out it will get some attention,” Merlin said. “We neeed some stronger regulation, from the insurance commissioner and (Chief Financial Officer) Jeff Atwater — the Legislature needs to do something.”

Audience members asked why rates need to keep going up when Florida has been spared from major storms for seven years.

“Give the absence of hurricanes in the last few years, why does our annual insurance rate keep rising so much each year?” asked Kirk Spresser of West Palm Beach.

One way to keep rates stable is to change the Florida Hurricane Catastrophe Fund, said Charles Grimsley, chairman and president of the Florida Property and Casualty Association, which represents many Florida-based home insurers. The Cat Fund helps make sure insurers can pay claims if bad storms hit.

Some bills in committee would shrink the Cat Fund, forcing insurers to buy more expensive private reinsurance and raise consumer rates 3.6 percent if private reinsurance rates stay the same, according to a Senate staff analysis.

But Grimsley’s group proposes that the Cat Fund kick in earlier, after $5 billion in losses to insurers instead of $7 billion.

That would keep rates stable at little added risk to the Cat Fund, he said.