Citizens–New Board, New Direction!

Last session’s singular focus on SB-408 ignored the fact that even massive reform is moot when facing a state run mega-competitor like Citizens. It continues to win “all” the good business, pulling in over 1,000 policies every day. Citizens CFO, Sharon Binnun testified during last week’s Senate Banking and Insurance Committee that the majority of new policies are full multi-peril homeowners which now total over  946,000.  Just two years ago, Citizens had only 607,000 such policies.

Lawmakers on the panel, including Senators Hays and Gaetz sounded like they get it.  They wanted to know what lawmakers could do to help.  Gaetz asked “When is it time to go back to being an insurer of last resort as opposed to being a malignant force that sucks up 1,000 unsuspecting customers a day?”

Kevin McCarty gets it.  In June he referred to Citizens as the 800 pound gorilla that had a “perverse impact” on the private market. He said, “we can never attract needed capital to Florida as long as Citizens remains competitive.”

Governor Rick Scott has made all the right moves, too, including appointing insurance professionals to the Citizens board.

CFO, Jeff Atwater’s on board. “We’re trying, with Rick Scott, to welcome back the risk-takers and the entrepreneurs,” he said.  Citizens “…started in 2002 as the insurer of last resort. Now, it has the No. 1 market share and has chased out everyone else.”

So, everybody gets it.  The question is, does Citizens new board get it?

There is much that the statutes and its plan of operation allow it to do without waiting until 2013; a point at which Citizens policy count could be just shy of 2 million.

The following is a list of things Citizens is permitted to do, on its own and perhaps with the approval of the OIR but, without the requirement that the statutes change.

  • Offer applicants of the corporation coverage forms that meet the requirements of the secondary mortgage market while providing coverage demonstrably less than that found in personal residential policies generally in use by the private market.
  • Eliminate coverage from any personal residential policy forms sold by the corporation, for contents items other than furniture, clothing and usual personal effects.  Emphasis should be placed on specialty or high value items such as: Jewelry; Furs; Firearms; silverware or gold ware; numismatic or philatelic property; paintings, artwork, musical instruments, etc.
  • Eliminate coverage for detached structures, screen enclosures (attached or unattached), watercraft, trailers, business property (on or off premises), etc.
  • Eliminate liability coverage for in-home business, animal liability or other prevalent private market exclusions or buy backs.
  • Offer only Actual Cash Value (ACV) reimbursement for roof damage.
  • As required by SB-408, insure that claimants spend sinkhole activity claim payments on repairs by using some form of holdback similar to that used for other perils or by making checks payable to the repair facility.
  • Pursuant to the plan of operation and Florida Statutes, determine the level of private market competition on a county-by-county basis for personal lines multi-peril policies and act to decertify counties, parts of counties or territories, as eligible for personal residential multi-peril coverage.
  • Except when necessary to accommodate emergency situations or the specific needs of a region of the state, initiate a moratorium on the appointment of new agents.
  • Replace the automatic renewal process so that policyholders must reapply when their policies expire and be subject to re-underwriting and a review of eligibility.
  • Require that all renewing policyholders receive and sign the acknowledgement form required under SB-408 (FS627.351(6)(c)(20) for new applicants. Consider an enhanced version that emphasizes the fact that the 1st tier assessment can be collected even if the policyholder non-renews.  Remember, if they non-renew they avoid the continuing assessment.
  • To allow for the fact that bonuses are no longer permitted, provide greater incentive for the removal of policies by reducing the ceding commission from 16% to 10% (roughly equal to a bonus of $100 per policy).  This reduces the capital necessary to make the assumption and thus makes more carriers eligible for takeouts.
  • Reduce or eliminate the availability of selected coverage and/or amounts.  As allowed by statute reduce the maximum amount of available Coverage C-Contents to 25% of Coverage A.  Reduce the maximum amount of available Coverage B-Other Structures, by half of its current level or entirely.




  1. Scott, No, Citizens doesn’t get all the “good” business. Just the opposite. Citizens takes the customers the private insurers don’t want. The private insurers decided last year they wanted the over $500k homes back, and the legislature complied. Those are some “good” customers, with lots to insure and that always pay their large bills. But with no hurricanes in recent years, maybe the private market would be willing to take some of them back. Profits are up, and rates could be lowered, attracting more customers.

    Why do you insist the way to operate Citizens is to do things that are not in the best interests of the customers? I assume it is to benefit the private market, your employers. But Citiizens board should serve their customers, providing the best product possible, at the lowest cost. What is wrong with that? Anything else is a disservice to the Citizens consumers and a subsidy to the private market.

    The private market already gets big subsidies from the taxpayers in the form of low cost hurricane back-up coverage and a place to dump any customers they don’t want.

    I thought the line was that the government couldn’t possibly match the efficiency of the private market. Surely consumer suffer grievously at the hands of Citizens customer service. But strangely, people seem to prefer their Citizens coverage. True there are complaints about Citizens immunity from “bad faith” and that should change.

    So why do you want the board to run Citizens into the ground, if not to benefit the private companies at the expense of the consumers? What kind of public policy is that? Of, by, and for the corporations?

    • Bill, thanks for the comments. I may respond more at a later time, but here’s my response to some of the more obvious issues you raised.

      I was careful to speak only to the 936,000 Multi-peril policies. The 400,000 wind only policies are, for the most part, uninsurable in any commercial sense. So, all the other perils are those the private market would love to write, and in doing so, could build capacity to write more wind coverage. Citizens would not be run into the ground if it were only writing wind coverage–It would merely be operating the way it did as the wind pool prior to Andrew.

      The Cat Fund is hardly a subsidy for carriers. Most carriers, those who have left, opposed it’s creation. It affords a layer of cheaper reinsurance true, but…it does not change the approved profit factor for carriers somewhere between 2.5% to 4.5%–consumer rates are lower, profits are not higher. In essence, if a carrier were to pay more for reinsurance, the same percentage profit it makes more dollar bills. Substantial portions of the Cat Fund are, and were unfunded (i.e.TICL), thus subsidized by consumer assessments; they are the ones the Cat Fund hurts. Carrier “ratings” were actually jeopardized by this attempt to backdoor taxes onto consumers.

      The things I promoted Citizens board to do ARE in the best interests of consumers. Remember, only 17% are in Citizens. They are supported by 83% who are not. My recent home insurance bill had a small rate increase on it but had assessments totaling nearly double the rate increase. I and others like me are consumers; and we’re in the majority…why aren’t you concerned about us? Why aren’t you concerned about those who can’t even afford a home?

      I respect you and we may never agree, but…by pointing to Citizens Bad Faith and saying there are complaints you’ve really showed your colors. The complaints are from Trial Lawyers who want to make a killing suing Citizens, thus increasing assessments. You talk about profits for carriers who are loosing money at record levels and who can’t charge any more than 2.5% to 4.5% for profit. Have you seen the profits made off of sinkhole claims by lawyers charging 33%? How can you say those profits, taken right out of the consumers claim, are in the best interests of “consumers”?


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