Editorial: Citizens Plan Looks Like
$350 Million Boondoggle
10/2/2012
By: Randy Schultz
The Palm Beach Post
In 2008, the Legislature swiped $250 million from the
surplus of Citizens Property Insurance Corp. The money
was a subsidy to private companies, so they would take
policies out of state-run Citizens.
At the time, Citizens had roughly 1.2 million policies.
Now, Citizens has roughly 1.5 million policies.
Since that giveaway worked so well, Citizens itself has
decided to try an even bigger one. The Citizens board
wants to take $350 million from its $6 billion surplus —
which would pay claims in a bad storm year — and offer
it to private companies. Combined with earlier
“depopulation” efforts, the hope is that 300,000 to
350,000 policies might be taken out of Citizens this
year.
Most Citizens hurricane policies are in South Florida,
and customers have good reason to be wary of this
supposedly great deal. In theory, the money goes to the
companies as 20-year loans, with a limit of $50 million
per company. In theory, Citizens customers who go with
the company that offers a private policy get the
“guarantee” of a 10-year deal, with rates rising no more
than 10 percent a year for the first three years. After
that, however, there is no annual rate limit.
On Monday, Insurance Consumer Advocate Robin Westcott
sent a letter with two pages of questions about the plan
to Carlos Lacasa, the Citizens board chairman. She asked
how Citizens intends to enforce that 10-year
“guarantee,” and whether there will be “exceptions.” She
asked if there had been outside study of the program.
She asked how Citizens will determine if companies
participating in the program are financially sound, and
wouldn’t collapse themselves after a storm and take the
subsidy with them.
On Thursday, advocates held a conference call to tout
the program. Consider, though, some of those advocates’
conflicts of interest. State Rep. Bryan Nelson, who
chairs the House Banking and Insurance Subcommitee, owns
an insurance agency. Dave Newell works for the Florida
Association of Independent Insurance Agents. Tom Feeney
is president of Associated Industries of Florida, whose
membership is said to include insurance companies. All
have a reason to want higher insurance premiums overall
and more policies in the private market.
“We are prepared to answer questions” about the plan,”
Citizens President Barry Gilway said, adding that some
provisions are “still being refined.” No kidding. This
plan whirled up like a quick-developing tropical storm.
Mr. Gilway and Rep. Nelson say speed is necessary to
have the policies out before next hurricane season, thus
reducing Citizens’ exposure. Among the many things
Ms. Westcott has questioned, however, is how
Citizens calculated the potential reduction in exposure.
Gov. Scott wants to get policies out of Citizens in the
worst way, and Citizens may have found it. The Post
has documented that inspectors have wrongly cancelled
discounts for many policyholders. Now comes this
undercooked $350 million subsidy. Why will what failed
in 2008 work in 2012?
