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Insurers helped write bill intended to shrink Citizens

By Paige St. John, Sarasota Herald-Tribune

March 23, 2011

A controversial bill that would eliminate a state tool designed to keep property insurance rates in check was written for lawmakers by the insurance industry, the Herald-Tribune has learned.

The bill includes a number of provisions argued for by private insurers to stop Citizens Property Insurance, the state-run carrier, from competing with them for business. It aims to keep Florida homeowners from flocking to Citizens and would force them to buy policies in the private market even when rates are higher and the carriers less stable.

Authors of the draft bill initially told the Herald-Tribune the legislation introduced by Rep. Jim Boyd, a Bradenton insurance agent, and Sen. Alan Hays, an influential member of the Senate insurance committee, is nearly identical to what was drawn up in private by industry lobbyists.

"What difference does that make?" Hays responded. "What difference does it make who writes the bill? The Legislature is the group that's going to pass the bill. Or reject it. So that's all that matters."

Boyd's reaction was similar.

"Nothing in the bill was presented that I didn't approve," he said.

Lawmakers could not provide specifics about who wrote what provisions in the bill. Boyd said he did not have time to find relevant documents, and both he and Hays referred inquiries to an industry lobbyist, who refused to provide names of those who helped draft the bill.

A legislative aide for Citizens initially said drafts of the bill generated by industry lobbyists matched the final legislation. Later, she described the current bill as "composite" written by the industry and the bill sponsors. She said Citizens did not agree with every measure that wound up in the 51-page draft document.

Consumer activists and advocates were troubled after learning of the industry's direct influence over the bill. They said they had no clue members of the industry met with state regulators in February to draft the bill.

"That's the way business is done in Tallahassee," said Bill Newton, executive director of the Florida Consumer Action Network. "It's very bad for consumers."

Defenders of the bill said the measure carrying Boyd's and Hays' names is necessary to protect inland residents, and business owners, from picking up the cost of others' hurricane damage. If Citizens runs out of money to pay claims, all other insurers would be taxed to make up the difference and those costs would be passed on to their own customers.

It is among a half-dozen bills meant to help Florida's struggling property insurers. Squeezed by high costs for reinsurance and unusually high payments to their own management firms, Florida carriers contend they need relief or will fail.

Though Citizens was initially designed after Hurricane Andrew to insure the riskiest Florida homeowners shunned by the private market, it has ballooned into the largest carrier in the state with 1.3 million policies.

In 2007, Gov. Charlie Crist championed legislation that opened up Citizens to more customers while lowering its rates, creating a company he hoped would force property insurers to compete. The industry-drafted bill now removes that mission, and the word "affordable," from Citizens' official purpose.

Christine Turner Ashburn, a lobbyist for Citizens Property Insurance who participated in the bill-writing, said the bill reflects policy goals expressed by key lawmakers and Gov. Rick Scott.

Ashburn and others involved in drafting the bill said participants included the Office of Insurance Regulation, the Florida Insurance Council, the Florida Chamber of Commerce and lobbyists representing several private insurers, including State Farm.

Though meetings often were held at Citizens' offices in Tallahassee, they said the ad hoc group was mostly organized by the Florida Association of Insurance Agents, which recruited participants. However, FAIA lobbyist Kyle Ulrich contended the working group was assembled by "others." He did not provide names.

"I am not trying to be difficult, but there were numerous meetings with different participants each time," Ulrich said in a written response. "Some meetings would have multiple representatives from the same group and other times there would be only one or none. I cannot tell you all the participants with absolute certainty."

Correspondence obtained by the Herald-Tribune include Ulrich as the recipient of draft copies of the bill.

There was no participation by a consumer organization.

"It would have been nice," said Terry Butler, the state's interim insurance consumer advocate at the Department of Financial Services. "At the very least they should have included someone from DFS — since the Chief Financial Officer appoints Citizens' chairman."

Ashburn said she was glad that Citizens had the opportunity to be included in drafting solutions on a difficult and perennial issue.

"It was a novel concept to work together for a change," she said.

The bill forces Citizens to artificially inflate its prices by factoring in costs private companies pay but Citizens does not.

It requires Citizens to increase premiums up to 25 percent a year for an individual homeowner and forbids rate cuts even when actuarial studies show it charges too much.

It also strips policyholders of the right to hire a public adjuster for assistance in filing claims and prevents them from accusing Citizens of acting in bad faith.

The bills, filed as SB1714 and HB1243, also raise the amount Citizens can charge policyholders if hurricane losses exceed premium collections.

The bill limits access to Citizens by preventing coverage for coastal residents whose homes are worth more than $500,000, or those who can find more expensive coverage in the private market. Only if private rates are 25 percent higher than Citizens could a homeowner apply to the public carrier.

Hays, R-Umatilla, argues Florida needs to shrink Citizens as fast possible before state consumers and business owners are saddled with the tab for a billion-dollar bailout.

"We have to just correct that underfunding and if we don't get started now, we'll be further behind the eight ball," he said.

Florida insurers complain that lowering and then freezing Citizens' rates made it difficult for them to charge enough to stay solvent.