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.