January 9, 2016
David Rafky, a Kendall retiree, repeatedly has filed forms saying he wants to keep his policy with state-backed Citizens Property Insurance. But the forms keep on coming.
Sunrise retiree Ron Smiley has had the same problem. Over the past four years, he’s gotten at least 10 letters from private insurance companies looking to assume his policy, he said.
With every notice, these and other policy holders must file opt-out forms by a specific deadline, or the policies automatically will move to the new carrier. For Rafky, opting out involves a trip to his insurance agency to process forms.
When he gets there, he said, he’s rarely alone. “A lot of people are tricked into [leaving Citizens],” said Rafky. “They don’t understand that if you opt out you don’t really opt out. You’re still in. … It’s a whole underhanded scheme that they’re running.”
But the practice is entirely legal, said a state spokeswoman.
Driving the barrage of letters is an effort by state-backed Citizens to limit exposure by decreasing the number of policyholders.
Created in 2002 after many national insurers abandoned the state because of hurricane risk, Citizens became the state’s largest carrier, with almost 1.5 million policies. Pushed by the governor and business leaders, Citizens has actively sought to trim its policies by as much as half, by shifting policies to smaller Florida-based firms who have the incentive of financial bonuses. Since 2011, a half-dozen of these so-called “take-out” firms have failed, costing taxpayers in excess of $400,000.
Still, the effort to slim Citizens continues. Policyholders who receive a letter from a private carrier wishing to acquire their business have a limited time in which they may “opt out.” If they don’t, their policy is assumed by the new company.
Some consumers have assumed that once they opted out of coverage, the matter was closed.
That was the case with George Lopez, 38, a general contractor in Coral Gables, who rejected coverage by Mount Beacon insurance in December 2014. When the company sent another notice almost a year later, he ignored it. Last month, he was shocked, he said, when he received a package regarding his renewed membership with Mount Beacon.
“I didn’t respond to the second — why would I respond to something that I already responded to?” he demanded angrily.
But Lopez and others like him are wrong.
“Citizens policyholders are notified when they initially apply for a policy and when they renew that they could potentially receive one or more take-out offers for private insurance coverage,” wrote Amy Bogner, spokeswoman for the Florida Office of Insurance Regulation, in response to an email query. “If a policyholder receives an offer for a take-out, they must opt out each time and decline the offer to remain with Citizens. This process is clearly stated in notifications to the policyholder by both Citizens and the take-out company making the offer and complies with the requirements in Florida Statutes.”
Now, if Lopez wants to return to Citizens, he must apply for a new policy.
According to Citizens Insurance spokesman Michael Peltier, in 2014, 90 percent of policyholders (481,299 people) received one offer from a take-out insurance company, while 8 percent (42,578 people) received two offers, and 1.1 percent (5,958 people) received three. That year, private companies assumed 416,623 Citizens policies. (The data for 2015 is not yet available.)
“There is no restriction as to how often [private carriers] can make those claims to policyholders,” he said. “Under the current system there is no regulation to make sure the policy owner doesn’t receive multiple offers from the same insurer.”
The notices, he said, are “set up clearly with a clear opt-out period. … I don’t think reputable companies are trying to trick folks to doing anything. In many cases the policies being offered contain more coverage than policies Citizens offers.”
Florida’s Insurance Consumer Advocate, Sha’Ron James, said she was not aware of policyholders receiving multiple assumption notices. “This is the first time I heard about it,” she said. “If we have multiple types of complaints or trends then the analysts would communicate with me.”
Executives at two companies, Mount Beacon and Heritage, agreed they may have sent multiple offers to some policyholders. Mount Beacon currently is not participating in any assumptions, said Kimo Winterbottom, the company’s chief financial officer.
Heritage sends out a second letter to policyholders who rejected initial offers because premiums change year to year, said Heritage’s president, Richard Widdicombe.
Still, his company tries not to send more than two offers to policyholders. “If they opted out more than a couple times we won’t go back to them,” Widdicombe said. “There’s been a few that have slipped through the cracks. We try to be cognizant of it but they do get repeated offers, unfortunately. … I know for some people it’s a nuisance.”
“A lot of people who have rejected a take-out offer a year and a half later accepted a take-out offer,” he said. “If we don’t send them a letter, [another company] is going to be sending this letter.”
But some consumer advocates say the practice of sending multiple notices is unethical.
“People are confused by insurance,” said Bill Newton, deputy director of the Florida Consumer Action Network. “They don’t pay a lot of attention. Particularly for the seniors, it’s harder to keep track of this stuff,” he said. “[The carriers] are hoping that they just give up or overlook a letter, don’t send it back and become a customer of their company.”
Rafky, the Kendall retiree, said he opted out of a January 2015 “assumption” offer from Heritage Property & Casualty Insurance, and a second offer from the company in December 2015. He’s so concerned about missing another assumption notice that he has written to his son to watch for offers in case he is somehow incapacitated.
Rafky said he’s concerned about the viability of some newer insurers. “At least the government will hopefully pay you.”