Citizens Rates–a Matter of Fairness!

In an editorial published by the Orlando Sentinel at least one lawmaker gets it right describing the discounted rates paid by some policyholders insured in Citizens.  He gets it even more right complaining about Citizens recent rate increase of 7.7% when the law was intended to authorize 10%.  (See NOTE #1 below)

With hardly enough detail about why raising their rates is the right thing to do, Representative David Santiago (R-Deltona), wrote…

“Ending the subsidies on Citizens policyholders is a matter of fairness to the approximately 79 percent of us whose insurance is not subsidized.”

He deserves a medal, in my opinion, going public with what far too many lawmakers, particularly those near the coast, are unwilling to admit–raising Citizens rates isn’t punishment to those receiving an unfair subsidy,  it’s a pardon for those who’ve been unjustly forced to pay that subsidy.

Representative Santiago also referenced the nature of the subsidy as benefiting those “…with high incomes…” and those “…who live out of state.”

A number of months back I was driving down South Ocean Boulevard in Palm Beach. Secured behind twenty foot manicured hedges, electrified fences and guard gates, are immense palaces disproportionately owned by non-residents–wealthy “snowbirds” and foreigners awash in some of the world’s most lavish life styles.  Worse, many are  vacation homes–play-houses, if you will, for families with names like Kennedy, Trump and Mellon.

While not exclusively the province of multi-millionaires, the rest of Florida’s coastline hosts 80% of  the states wealth. And, it’s where Citizens biggest subsidy exists; the Coastal Account, formerly known as the High Risk Account, provides high risk wind coverage (wind-only & multi-peril) to 384,232 homeowners with over $100 billion (with a “B”) in exposure.

Believe this…when I see the Citizens assessment on my Tallahassee homeowners policy (and my auto policy) it has a tendency to stick in the old craw.  Fairness? I can’t imagine how a dishwasher at Mar-a-Lago  or the upstairs maid at the Kennedy compound must feel paying assessments on their PIP premiums.

Nor is it fair that charities, religious institutions, local governments and school boards are assessed to benefit the rich. In fact, it’s downright unfair that thousands in tenement housing, or middle class citizens with modest homes have their earnings confiscated to provide bargain basement prices to those who not only don’t need it but, if asked, might willingly forfeit such unjust enrichment out of, well….”fairness!”

In 2012 360,000 Citizens policies were issued for non-owner-occupied homes. Among those, are 192,000 owned by folks from Canada, New York and New Jersey–82% of which didn’t even need to borrow money to acquire their vacation villas. (See NOTE #2 below)

Using the last U.S. Census, The American Consumer Institute calculated it would take the income of nearly 20 Gainesville households to equal the income of the median household on Miami’s Fisher Island. But, residents of Fisher Island with a structure less than $1 million (no land value included) qualify for subsidized premiums, and, again…a substantial majority (60%) are unoccupied vacation and investment homes.

According to Citizens immediate preceding rate filing (September 2012),  its rates for policies covering wind are discounted about 30% on a statewide aggregate basis.  Why is it so hard for the Citizens board to implement a rate increase that meets the statutory cap of 10% statewide, instead of one at 7.7%?

Why would that be so hard for the OIR to approve, or the media and the demagogues to understand?

Why would anyone except the most selfish of individual complain–certainly not those on Fisher Island or South Ocean Boulevard.

The level of dispensation granted to coastal homeowners (“non-residents” and residents alike)   was carefully researched and nauseatingly debated by elected officials before implementing the current annual glide path cap of 10%.  For someone, anyone, to bestow deference beyond that 10% isn’t just “unfair” as Representative Santiago pointed out…

…it’s unconscionable! 


NOTE #1: I understand the rationale given for an increase less than 10%. I also understand there is equal rationale permitting the annual statewide average increase to be the full 10% permitted.  Implementing the latter makes sense in light of Representative Santiago’s comments indicating legislative intent: “Regrettably, Citizens’ board recently approved overall rates and ignored legislative recommendations. This will make hurricane taxes more likely for non-Citizens policyholders if a big storm hits and would tax property, auto, boat, business and other policies. It would make these taxes much more likely for Citizens policyholders who are taxed before private insurance policyholders and at much higher rates.”

NOTE #2: In a report from the American Consumer Institute titled “Welfare for the Rich: How Citizens Insurance Corporation Harms Floridians.” it’s revealed that 82 percent of Florida non-residents are rich enough to pay cash to purchase their Citizens insured “vacation” home.  According to Citizens 2012 internal records; of the 192,000 out-of-state policies insured the top  five mailing locations (US & foreign) are: New York-24,908, New Jersey-11,165, Georgia-10,859, Michigan-10,005, Illinois-9,876, Canada-20,188, United Kingdom- 1,024, Ireland-147, Israel-91, Puerto Rico-76.  




  1. […] after I called it a  matter of fairness my inbox was besieged with “atta-boys!”  Then, within days, articles, press releases, […]

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