Citizens Rates–One Good Punt Deserves Another!

The statutes are replete with opportunities for the Citizens board to reduce policy count and exposure.

One presumes this to be intentional since lawmakers would not even take up recent Citizens bills.  Essentially, along with existing statutes that allow them to be made, the legislature “punted” unpopular decisions to the Citizens board of governors–some privately admit as much.

Citizens board responded–fielding the punt and moving the ball down field using legislatively authorized proposals that have brought nothing but consternation or eerie silence from those who kicked the ball in the first place.

Last week (Thursday, May 17, 2012) Citizens Actuary and Underwriting (AU) Committee looked at data showing what would happen to rates if the current glide path did not apply to new applications.  The meeting was an offshoot of an interpretation by Citizens corporate counsel, Dan Sumner, who opined that quotes given to Citizens new applicants don’t constitute a rate increase and, therefore…the statutory 10% cap on rate increases would not apply.

Somebody call mission control… “We have ignition!”

Consumer groups quickly railed in opposition.  Senator Fasano made his usual presentation to the board and has promised to file a lawsuit.  Sean Shaw emoted on the differences between numbers and  people.

Lawmakers with heavy Citizens constituencies (Rep. Carlos Lopez-Cantera and Sen. Anitere Flores), wrote letters to Citizens interim director Tom Grady.  Senator Flores called any attempt to remove the cap…“immoral” and said she would introduce legislation next year making it clear, (really, really clear) that the cap applies to new applicants.

CFO Jeff Atwater, sent a letter clarifying the legislature’s intent for  rates of new applicants to be capped along with those of existing policyholders. Insurance Consumer Advocate, Robin Westcott did similarly.

And of course…hither and yon it was all spread by a “hyperventilating” media that still doesn’t really get it.

Thus was the backdrop for a meeting of AU committee members suddenly forced to consider the following three options:

  1. Change nothing. Treat new and renewal business the same applying the current 10% glide path to both.
  2. Remove the cap for new applicants and immediately file for actuarially sound rates.
  3. Remove the cap for new applicants, but…file for a glide path approach to reaching actuarial soundness–in essence applying a cap to the removal of the cap.

Data showed the premium impact to be as much as 95% in some areas so the AU committee did not pick an option at last week’s meeting.   A number that high means the only choice that could’ve avoided an actual missile launching was “no way Jose!” and it wasn’t on the table.

Meanwhile, board chairman Carlos LaCassa, who said recent stories on Citizens have had an “explosive nature” and an “exaggerated nature”… urged Citizens to move slowly and involve the legislature in its deliberations.

Alrighty then…I’m gonna go way, way, out on a limb here and say I don’t think the 10% rate cap will be removed for new applicants.

But…I do have a recommended course of action for the Citizens board.

To avoid sticker shock, it should implement option number three(3) above, but…and this is the kicker… make any removal or gradual implementation of the cap effective after the next legislative session!  

That way, if lawmakers disagree with either Dan Sumner’s interpretation or the board’s proposal they can pass whatever bill they want in order to keep the proposal from being implemented or to clarify what they originally intended with respect to the cap. Likewise,  if Governor Scott disagrees with the legislature he can veto whatever lands on his desk.

And, the best part of this approach is…whatever is done or not done next session, the Citizens board will have effectively handed the issue back to the legislature which had punted it to the Citizens board by passing a rate cap then refusing to even take up meaningful reform.

Even those who don’t agree with the boards decision would have to agree…one good punt deserves  another!

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