Citizens Insurance Need Not Loan
By: Glenn Marston
The insurance consumer advocate for Florida on Monday released a long series of
concerns about a plan of the state-owned Citizens Property Insurance Corp. to
loan $350 million from its surplus fund to private insurance companies. They
would take over the policies of some Citizens' customers.
Many in state government, the insurance industry and across Florida say the
state has taken on too much liability — creating a burden on state government as
well as the residents of Florida, who ultimately stand behind the company. They
say Citizens was intended only as an insurer of last resort, one for those who
could not find property insurance elsewhere.
The result has been an effort to encourage private insurance companies to take a
greater share of the market.
For some, the idea of adding private coverage is a matter of principle or
ideology. They just don't think the state should be in the insurance business —
property insurance should operate as a free market.
For others, private coverage is a matter of reducing the state's liability in
the case of massive claims of the sort that could result if a large-and-powerful
hurricane were to cause great damage to many homes.
However, until Citizens unveiled the notion of the $350 million "surplus-note
loan," for which insurance companies had lobbied and which the Citizens board
approved in September with minimal public comment, few had contemplated the idea
of loaning money to private insurers to accomplish the privatization goal.
With her announcement Monday, Consumer Advocate Robin Westcott wrote a letter to
Citizens Chairman Carlos Lacasa, laying out her concerns, reported the News
Service of Florida."
The Office of the Insurance Consumer Advocate shares the board's goal of
depopulating Citizens, and reducing the potential assessments on all property
and casualty policyholders in the state," she wrote. However, she added,
"Citizens must assure consumers and policy-makers that a thorough cost-benefit
analysis justifies the commitment of up to $350 million of Citizens' surplus, as
this program would allow."
Friday, incoming speaker of the House Will Weatherford, R-Wesley Chapel, also
wrote to Lacasa, reported the Tampa Bay Times.
"I am concerned that board's aggressive timeline will result in the program's
implementation before the two chambers of the Legislature complete hearings on
this important matter of state policy," Weatherford wrote.
"My concerns involve serious questions regarding the process by which the
proposed program was approved, the sufficiency of the information and analysis
on which the approval was based, and uncertainties regarding the board's legal
authority to adopt and implement the program," he wrote.
The transfer of more than 200,000 policies of an expected transfer of 350,000
policies is under way, reported The Palm Beach Post. Citizens holds 1.4 million
policies.Citizens' surplus-note loan is "reckless," says state Rep. Frank Artiles,
R-Miami.Artiles wrote a letter to Citizens president Barry Gilway on Sept. 28, reported
The Post."In short, you are well on your way to accomplish your goal of 300,000 customers
by year's end, and you do not need to give away $350 million to do so," Artiles
Loaning money to insurance companies to prod them to take over policies —
something they were in the process of doing without a loan — is not necessary.
It is bad governmental policy and it would disrupt the private market.