Frank Artiles: It's Our Money that Citizens is Gambling

9/18/2012
By: Frank Artiles
Tallahassee.com

At a hearing scheduled for 4 p.m. Thursday at the Miami Dade College Wolfson Campus, the Citizens board will consider input regarding a proposed premium rate increase of nearly 11 percent statewide. It is the only scheduled hearing for public comment.

Plainly speaking, it amounts to robbing Peter to pay Paul. That’s what the board of Citizens Property Insurance Corp., Florida’s property insurer of last resort, did this month when it voted to award $350 million in low-interest, forgivable loans to a handful of private sector insurance companies to take hundreds of thousands of Citizens’ policies.

Citizens’ board calls the loan program a needed incentive for insurance companies to take the policies. But there are three serious issues with this plan:

• The $350 million in loans comes from premium dollars paid by Citizens’ policyholders with no guarantee of full repayment.

• Citizens incorrectly branded the loan program as offering “incentives” when it is actually paying “bonuses.” Before hatching this plan, Citizens was set to remove more than 270,000 policies from its rolls this year alone, in addition to more than 110,000 policies moved to private insurers in 2010 and 2011. Depopulation efforts are alive and well — and private insurers did not need motivation to take some of Citizens’ lowest-risk policies. But they will appreciate the added bonus.

• Citizens’ board passed the plan with no public input, and no consultation with legislators.

Under the loan program, private insurers could borrow up to $50 million for 20 years at a low interest rate of 2 percent. In return, Citizens obligates the insurers to take the policies for only 10 years, and allows them to raise rates beyond 10 percent a year, after three years.

To make matters worse, virtually none of the insurance companies in line to take the policies have been audited in at least three years by the regulators. With no recent audits, Floridians have no assurances that these insurers — several of which have had massive underwriting losses over the past five years — are financially healthy enough to withstand storm losses.

This plan is a gamble that no Floridian can afford to take. Citizens’ board is tone deaf to the public’s best interests — it seems interested only in making inside deals that run counter to free-market principles and fairness. It’s no surprise that as many as 300,000 of the affected policies would be given to Tower Hill, a giant insurance conglomerate that created the program, is seeking up to $200 million in loans, and actively lobbies Citizens’ board.

I have asked the Florida Office of Insurance Regulation to perform audits of the insurers in line to receive the loans. We need what I would call an “assurance policy” that gives us confidence these insurers aren’t going to leave policyholders high and dry. While the audits take place, Citizens should discuss its plan with policyholders and the Florida Legislature.

I agree with Citizens’ board chairman Carlos LaCasa that Citizens needs to aggressively reduce the number of policies it carries, but the reduction needs to be made responsibly so Floridians aren’t burdened with more costs. As reported in the Tampa Bay Times and Miami Herald, Florida’s insurance consumer advocate, Robin Westcott, said that the plan was pushed through “in a hurry.”

A plan of this magnitude, which impacts the future cost of all Floridians’ property insurance, deserves an open debate, not a board decision influenced by lobbyists that smacks of an insider, sweetheart deal.

Tell Insurance Commissioner Kevin McCarty how these insurers need to be audited and how Citizens’ board needs to slow down this train to get input from ratepayers and the Legislature.

State Rep. Frank Artiles, R-Miami, has a master of law in real property development from the University of Miami Law School and is a general contractor and a public adjuster and appraiser