Senate plan seeks to shrink Citizens Insurance

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A Senate committee Wednesday took up a draft proposal that supporters hope will shrink the state-backed Citizens Property Insurance and drive policies into the private insurance market, reports Jim Saunders of the News Service of Florida.

The proposal would make a series of changes that could affect insurance rates and also is geared at preventing homeowners from getting coverage from Citizens if private companies offer similarly priced policies. Senate Banking and Insurance Chairman David Simmons, R-Maitland, said he wants to make sure there is a “free market” for people to buy insurance.

“The purpose of this is to benefit the residents of the state of Florida. It’s not to do anything but that,” Simmons said. “We know what we’ve got isn’t working.”

The draft, released Tuesday, will come back to the Banking and Insurance Committee later this month. Simmons said he is looking for committee members to make suggestions that could lead to changes in the proposal.

In the past, bills dealing with Citizens and the broader property-insurance market have been politically volatile, as lawmakers grappled with proposals that would raise homeowners’ premiums. Citizens is the state’s largest property insurer, with roughly 1.3 million policies as of Dec. 31, and does large amounts of business in areas that are prone to hurricanes and sinkhole claims.

Citizens’ critics, meanwhile, say insurance policyholders throughout the state — including those insured by private companies — could be forced to cover the costs of Citizens claims if a major hurricane slams into Florida. Along with saying that is not fair, critics argue the state’s insurance system has flaws that lead to policies unnecessarily landing in Citizens instead of the private market.

The Senate draft would take steps to try to address those concerns. For example, state law says a homeowner is not eligible for a new Citizens policy if coverage is available from a private insurer at a relatively similar price. That price is up to 15 percent above what Citizens would charge.

Under the draft, that eligibility restriction also would apply when already-existing Citizens customers come up for renewal on their policies.

The bill also would require Citizens to use what is being described as a “clearinghouse” that would allow private insurers and agents to write policies for people who have applied for Citizens coverage or are renewing coverage. As part of that, Citizens customers would be required to submit new applications for coverage after three years with the state-backed insurer.

Locke Burt, a former senator who is chairman and president of Security First Insurance Co., told the committee that many agents don’t have the ability to shop for coverage throughout the property-insurance market, which can help lead to policies going to Citizens instead of private insurers. Also, he said many consumers don’t know how to shop for coverage.

“People hate to shop for insurance,” Burt said. “They hate to switch companies.”

The draft bill also would change the way Citizens rates are determined for new policies, houses valued at more than $300,000 and non-homesteaded and commercial properties.

Citizens’ rates for those policies would be based on a comparison with the 20 largest private insurers in Florida. The Citizens rates would be tied to the highest average amount charged by a private insurer in each area. Even if a private insurer has high rates in an area, it might not be willing to sell coverage to many homeowners, who could then wind up in Citizens.

It was not immediately clear from the draft how much Citizens rates would be affected. Also, other parts of the proposal could affect rates charged to customers of private insurers.

For instance, the draft would require the state Office of Insurance Regulation to calculate what is described as an “insurance inflation factor” each year based on costs in residential insurance filings. Property insurers that propose increases lower than the inflation factor would not need to go through the normal rate-review process.

Citizens policyholders, particularly in areas such as South Florida, have long argued that they cannot find coverage on the private market and that Citizens’ premiums are too high.

But Burt, who gave a lengthy presentation Wednesday, said insurers are willing to take many policies that are winding up in Citizens and a large number of customers would not have to pay more for coverage. Simmons echoed the insurance executive, saying it is a “myth that doing what we’re doing is going to raise rates.”

Peter Schorsch is the President of Extensive Enterprises and is the publisher of some of Florida’s most influential new media websites, including,,, and Sunburn, the morning read of what’s hot in Florida politics. SaintPetersBlog has for three years running been ranked by the Washington Post as the best state-based blog in Florida. In addition to his publishing efforts, Peter is a political consultant to several of the state’s largest governmental affairs and public relations firms. Peter lives in St. Petersburg with his wife, Michelle, and their daughter, Ella.