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Numbers Game for Citizens

3/2/2013
By: Maria Mallory White
Sun Sentinel

A massive bill to reform Citizens Property Insurance Corp. cleared its first legislative hurdle Thursday with an 11-1 vote in the Senate Banking and Insurance Committee.

Senate Bill 7018, quarterbacked by committee Chairman David Simmons, R-Altamonte Springs, is an attempt at "a delicate compromise," to balance the interests of rate-sensitive Citizens policyholders and those Floridians not covered by the state-funded insurer who face assessments if Citizens cannot cover its claims, Simmons said before the vote.

One of the key challenges in revamping Citizens lies in its routinely discounted or under-market rates. According to the company, homeowners in high-risk areas frequently pay rates far less than what is "actuarily sound," or enough to cover estimated potential losses.

If SB 7018 becomes law, "all future policies written by Citizens would be actuarily sound," Simmons said. The company would also be returned to its original mandate of insurer of last resort, he said.

The complex bill has many detractors about all or parts of it, some of whom say it cleared the committee only because members didn't want to embarrass Simmons, its primary architect.

"That happens a lot over in the Senate, giving deference to the [committee] chairman. If [the bill] even gets out of the Senate, I'll be surprised," said Rep. Mike Fasano, R-New Port Ritchie.

"Every year, the [insurance] industry and a few members of the Legislature and our governor, God bless him, work on a bill that's going to bring private industry back to the state, and it doesn't work," Fasano said.

The Senate action comes one day after proposals to cap Citizens policies at $500,000, allow private insurers to use a clearinghouse to cherry-pick the company's least risky policies and help improve the public perception of the state-backed company moved forward in the House of Representatives.

Members of the House Insurance and Banking Subcommittee supported a bill Wednesday that would also create an inspector general position, as requested by Gov. Rick Scott, Chief Financial Officer Jeff Atwater and others in response to reports last year of unprofessional behavior and lavish travel spending at the company, which has about twice the number of policies that some would prefer.

The House proposal also would cap policies on reconstruction costs starting at $1 million next year, with the maximum decreasing to $500,000 by Dec. 1, 2018, for new policies, and in 2019 for renewals, a pace much slower than originally considered by the Senate.

Rep. George Moraitis, R-Ft. Lauderdale, in casting a vote against the proposed bill, said the $500,000 cap might be too low for homeowners in his coastal area.

"While a $1 million home isn't inexpensive, and $500,000 homes are certainly above the median, I've gotten complaints from people that have $1 million homes that they've had to pay 40 percent more in insurance costs when they couldn't get Citizens," Moraitis said.

With more than 1.3 milion policyholders now covered by Citizens, downsizing efforts under consideration by legislators have drawn support from business and environmental groups.

The House legislation approved Wednesday would also bar new policies seaward of the narrow coastal construction control line as of July 1, 2014.

The clearinghouse would require Citizens to set up a computer program that would first determine whether private firms are available and then would require a property owner to select an available proposal if within 15 percent of the cost of Citizens' coverage.

The House proposal also would cap policies on reconstruction costs starting at $1 million next year, with the maximum decreasing to $500,000 by Dec. 1, 2018, for new policies, and in 2019 for renewals, a pace much slower than originally considered by the Senate.

Florida Insurance Consumer Advocate Robin Smith Westcott said lawmakers need to be careful about moving too swiftly with the changes.

"We're in the place in the market where we don't have to be that aggressive, we just need to be very specific, and we can make the greatest amount of difference for the least amount on the policyholders," Westcott said. "We've got to quit fighting about inside versus outside, the coastal control versus interior, north versus south. This is all our problem. We can do some very common-sense things without impacting and driving costs for the entire state."