Crist sees Citizens as key player

Article Courtesy of The Palm Beach Post

By S.V. Date, Michael C. Bender And Randy Diamond
Published  January 12, 2007

TALLAHASSEE — State-run Citizens no longer should be the insurer of last resort, but one of the state's most competitive, able to go head-to-head with State Farm, Allstate and other private companies all over Florida, Gov. Charlie Crist said Thursday.

Crist, unveiling his "must have" priorities for legislation in next week's property insurance special session, said one key feature is to let Citizens Property Insurance Co. offer full, competitively priced homeowners policies all over Florida - not just windstorm policies, and not just in high-risk coastal areas.

"If we're going to be in this business - and, hello, we are - well, then, the one entity that we have direct control over ought to have the opportunity, I believe, and the ability to compete," Crist said. "This is another form of cherry-picking. They've been left with the pits. And I don't think that's right. In essence, the people's company has been left with some of the worst and the most challenging policies."

Crist's approach goes even further than the state Senate, which on Tuesday outlined a bill that would let Citizens write "all-perils" policies - protecting against fire, theft and other non-hurricane threats - in the high-risk area, which in Palm Beach County is east of Interstate 95.

The intended goal is to broaden Citizens' financial base and lessen the chance of further "assessments" on homeowners policies and taxpayer bailouts. Senate Majority Leader Daniel Webster said Crist's plan could find support in that chamber because it would advance that goal even further.

"If it makes Citizens more stable, if it keeps us from having to invest taxpayer money into it to keep it whole, then I think they ought to be able to do that," Webster said.

The House bill, however, does not contain a similar provision.

"We need to make sure that the cost savings are really there and we aren't driving away private insurers,'' said Ron Reagan, chairman of the House Insurance Committee. Offering premium savings to consumers is the primary force behind the House insurance bill, he said.

Crist's proposal could find its way into a House bill from Rep. Ellyn Bogdanoff, R-Fort Lauderdale, who has proposed deleting a law that Citizens' rates must be higher than the state's top 20 insurers. She said she would not be opposed to Crist's idea.

"We're in survivor mode," she said. "The perception right now is that there is no private market and that we have to do something to kick-start that market."

Allstate Floridian lobbyist George Grawe said lawmakers should find ways to encourage insurance companies to write hurricane policies in Florida.

Letting Citizens compete with the private market, he said, would be "a gamble."

"Companies have to have the ability to rebuild their capital because it is all gone," Grawe said. "That's what should be concentrated on, not punitive proposals that actually make it more difficult for the private market to do business in the state."

Crist, though, said that writing only the undesirable policies was causing much of the problem for Citizens.

"Right now these private companies are taking on all the safe risk, where they are assured of a profit," Crist said.

Citizens, Florida's largest insurer with 1.3 million policyholders, writes most of the wind risk in coastal areas east of Interstate 95 in South Florida, but it is not allowed to write other policies covering fire and other risks, which are reserved for private insurers.

Citizens had losses in the 2004 and 2005 hurricane season that exceeded its capital base by more than $2 billion, triggering insurance surcharges on every property policy in Florida for the next decade.

"Having it such that Citizens can actually compete instead of just getting the pits of the cherries, I think gives a greater opportunity for more competition," Crist said. "The more competition we have, the better off it is for the consumer. You give them more choice, they have more options, they have more power, they get more leverage, their rates can be lower."

Crist listed a number of other items he wants to see in whatever bill the House and Senate come up with next week, including: requiring "broad-based and meaningful" rate cuts; phasing out the Florida-only "pup" companies that large insurers have set up; forcing insurers who write property policies in other states to write them in Florida or lose the ability to write other profitable lines, such as auto, in Florida; setting a uniform statewide building code; and improving state programs to help residents to harden their homes against storms.

Crist said he was pleased with the direction the House and Senate have taken in their bills so far.

"I couldn't be more optimistic. I'm almost ready to eliminate 'cautiously' optimistic ... because of the dramatic steps that have been taken this week," he said.

He said the most important feature would be a requirement that rates actually go down.

"I'm not going to sign it unless it has that," Crist said. "I'm very optimistic that at the end of special session, that kind of document is what's going to come to the lieutenant governor and I."

Webster, R-Winter Garden, said that either the Senate or the House proposal for having the state increase the supply of taxpayer-guaranteed "reinsurance" to insurance companies would lower premiums.

He said explicit language could easily be added to the bill to require that homeowner rate reductions occur quickly.

"If they (the governor's office) need a guarantee? I think we can offer that up," Webster said.

Crist said the changes would be a salve to Floridians suffering from increasing homeowners premiums.

"There truly is a new wind blowing here," he said. "The powerless have now become the powerful."
Governor's goals

• Require insurance companies to make 'meaningful and broad-based' rate cuts.
•Eliminate 'pup companies' subsidiaries that parent companies set up in Florida to protect them from catastrophic losses from a major storm.
• Eliminate 'cherry-picking' by requiring companies that sell property coverage in other states to offer it in Florida, too, or lose the ability to write profitable coverages such as auto in the state.
•Make state-run Citizens Insurance competitive with private companies anywhere in the state.
•Require uniform state building codes, eliminating an exemption lawmakers gave the Panhandle.
•Enhance state programs to get money to people to stormproof their homes.