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Private carriers seek up to 500,000 Citizens customers by year’s end, but homeowners call for better information

9/13/2013

By Charles Elmore, Palm Beach Post

DELRAY BEACH — A potential record-breaking exodus from state-run insurer Citizens is possible with private insurers now set to take nearly 500,000 customers by December, but wary homeowners asked a panel including the Citizens CEO Thursday why they should trust the carriers sending letters seeking their business.

“I’m not going to switch to another company if you give me no information about them,” said property owner Phil Friedman of Delray Beach. “A couple of years ago, I was stupid enough to switch.”

All too often, consumers know next to nothing about companies that sometimes later shut down, drop policies or jack up rates, attendees said at an insurance forum hosted by state Sen. Maria Sachs, D-Delray Beach. In Friedman’s case, the private company later dropped him and he had to go through the hassle of switching back to Citizens, he said — an experience familiar to thousands of South Florida consumers in recent years.

Citizens CEO Barry Gilway acknowledged the concerns of more than 60 people in attendance but said private carriers in the state are “getting stronger every day.” Florida-based insurers are set to seek another 85,000 Citizens customers in December, he said, adding to the nearly 400,000 marked for transfer in November.

Customers have the choice to stay with Citizens so not all will necessarily go, but 2013 is on track for the biggest yearly shrinkage for the state carrier of last resort. Citizens has downsized to 1.2 million customers from about 1.5 million a little more than a year ago.

Gilway agreed letters notifying customers of an offer from another insurer could be improved with information such as how much the new policy costs and what it covers.

“You’re absolutely correct,” Gilway told Friedman. The content of the letters is controlled largely by state regulations, but sending insufficient information “hurts us,” Gilway said. About 35 percent of Citizens customers typically choose to stay, not counting those who later go back.

National brand-name insurers are mostly not writing new policies in Florida, but homegrown carriers are showing increased interest in giving Citizens customers a choice, he said.

“The picture I’d like to paint is things are getting better,” Gilway said.

The Citizens rate increase approved this week for 2014 is about 6.3 percent for Palm Beach County, below a 10 percent cap imposed by state law, he noted. That means rates are getting close to what the company considers adequate, with some exceptions including wind-only coastal customers.

“The rate increases should be slowing,” Gilway said. “If you live on the coast, obviously that’s a much, much tougher issue.”

The shrinking gap in premiums between Citizens and private insurers means “companies are becoming more competitive with Citizens prices,” said Florida insurance consumer advocate Robin Westcott, another panelist.

In addition, a key cost is falling for insurers — reinsurance, or back-up coverage they buy to help cover claims. For consumers, that eases the risk a little bit that private insurers will dramatically increase their rates once they move from Citizens, said Jay Neal, president of the Florida Association for Insurance Reform.

Nearly all the panelists agreed the state could do a better job of providing ways for consumers to shop and compare insurers.

It can be a challenge for homeowners to sort it all out, but at the end of the day, the Citizens chief said, consumer choices are improving and his company will soon be a lot smaller.

“My belief is Citizens will be well below 1 million customers, heading to the 800,000 level” in the coming year, Gilway said.