State insurer may retain policies

The state's top insurance commissioner may allow homeowners to stay in Citizens Property Insurance if offered over-the-top rates by private carriers.

Article Courtesy of The Miami Herald

Published  September 22, 2006

Florida's top insurance regulator said Thursday he may consider allowing homeowners to stay with the state-run insurance pool if they're offered a policy with substantially higher rates from a private market carrier.

Insurance Commissioner Kevin McCarty's suggestion was prompted by the outsized rate increases demanded by several small insurance companies recently, many of them start-ups that have taken high-risk windstorm policies out of Citizens Property Insurance. Two of these firms are Homewise Insurance and Florida Peninsula.

During a meeting Thursday in Miami of the Property and Casualty Insurance Reform Committee, which will make recommendations to Gov. Jeb Bush in November on how to alleviate the state's insurance crisis, McCarty said the newly launched commercial property and casualty joint underwriting association allows small businesses to stick with the state-run pool if offers from the private market are 25 percent higher.

McCarty said he would consider a similar option for homeowners. Such a recommendation would go through the committee and require legislative action.

Current state law doesn't give a homeowner an option: If a policy is removed from Citizens by a private insurer, usually a start-up firm, the homeowner has no choice but to move to the new carrier even if the rates are higher. Such a law was put in place because lawmakers hoped to shrink Citizens over time through policy takeouts.

A variety of factors -- including eight hurricanes in two years and the demise of one of the state's largest insurance companies this summer -- have swelled the number of policies on Citizens' books. It's now the largest insurer of homes, condos and apartments in Florida, with more than 1.2 million policies in force.


McCarty said the state's current consumer choice option, which lets a homeowner continue working with his current agent even if he is taken out of Citizens by a private market company, doesn't really address the issue of rates. And by law, Citizens' rates have to be higher than the 20 largest insurers in the state, but not the dozens of smaller firms that are taking on Citizens policies, particularly in South Florida.

At the start of its meeting Thursday, the committee heard from consumers like Colleen Repetto from Marathon, who worries that the state's insurance crisis ``has become an economic disaster.''

Dulce Noguera from North Bay Village said the high insurance costs are forcing middle-class folks from their homes.

She managed to bring down a $13,000 insurance bill to between $7,000 and $8,000 by opting for a higher deductible.

Still the sky-high premiums are distressing. ''I feel like I'm being held hostage by these insurance companies,'' said Noguera.


Because mitigation is seen as one of the best way to reduce insurance losses, Lt. Gov. Toni Jennings, who chairs the committee, said it might be a good idea to recommend that Citizens demand homeowners fortify their homes against hurricanes as a requirement for maintaining coverage with the state-run insurer.

The reasoning, which members of the panel concurred with, is that stronger homes can better weather massive storms, resulting in fewer claims for the insurer to pay.

The mitigation argument was reinforced by a study presented to the committee by Risk Management Solutions, a San Francisco Bay area modeling firm used by many insurers to calculate their premium rates.


The study found that reinforcing shingles, bracing the roof, adding high-impact shutters and wind-resistant doors can reduce damage by more than 60 percent.

The study may give more weight to the argument for a larger discount for those who follow such measures, and it could spark more interest among insurers in offering wind coverage to those who make the changes. The task force has been looking into whether to require insurers to give standardized discounts to those who make such improvements.