Florida Candidates for Governor Pledge to Solve Citizens Problems, Add Insurers

By Dave Kaiser
January 23, 2006

Solving Citizens Property Insurance Corp.'s problems, encouraging new insurers to enter the Florida market and lowering property insurance rates were debated by candidates for governor of Florida during a Jan. 20 forum for candidates held during the Florida Association of Realtors mid-winter business meetings in Orlando, Fla.

Florida Attorney General Charlie Crist (R), U.S. Rep. Jim Davis (D-Tampa), Florida CFO Tom Gallagher (R), and Florida Sen. Rod Smith (D-Alachua) fielded questions posed by FAR members about how to solve Florida insurance problems.

Davis: Taxpayers fleeced

"I think what has happened with Citizens has been a disgrace and the gentleman sitting next to me (Gallagher) has been on the board that oversees Citizens," Rep. Davis commented. "I believe they have had some responsibility and it looks like we as taxpayers have been fleeced. Folks are not minding the store in Tallahassee."

Crist: Citizens needs overhaul

Attorney General Crist said there isn't any question that Citizens Property Insurance needs to be overhauled. "It is perfectly clear to me, as it is to most Floridians that property insurance rates are too high," he said, emphasizing more competition, not less.

Crist said he would promote private enterprise and encourage new carriers to come to Florida.

"I think it is very important that we reach out to these insurance companies and say, 'Look, you have earned an awful lot of money on the backs of these Floridians and that's got to stop. You have to compete better, compete farther, offer rates that are reasonable and you better start paying these people.'

"I have seen so many blue tarps in this state, it is unbelievable, and those aren't from hurricanes that happened this year, those are from hurricanes that happened last year," Crist pointed out. He says there's a whole FEMA village that exists in Charlotte County.

"We have got to do better for our people, we have to fight harder," Crist said.

Gallagher defends Citizens

"No one has fought more than I have to make sure people got their claims paid," Florida CFO Tom Gallagher said. "I held public forums throughout the state where people came and we made the insurance companies be there and many claims were taken care of at those town hall meetings. So not only through Hurricane Andrew, but we did it through the four storms in 2004 and Wilma in 2005. We set up mediation so that people could get their claims taken care of without having to file a lawsuit.

"Nobody ever expected to have $32 billion worth of losses in 15 months. The best thing we can do is take care of insurance rates and the availability is to stop having hurricanes. Sure to that," Gallagher quipped.

"No one has been more critical of Citizens than I have," Gallagher said. "I started the task force and made recommendations to the legislature last year. The legislature passed some of those, and have more for this year.

Gallagher pointed out that Citizens provides 800,000 people in this state with insurance. He attributed that to the fact that there's no private marketplace.

"Without Citizens, where would we be? There would be no mortgages, there would be no real estate closings, there would be nothing else," the CFO said.

"Does Citizens have problems?" he asked. "Sure it has problems. When you have a company that was built up instantly to 800,000 policyholders and you have a storm, that's a problem."

Gallagher said he has been working to solve those problems and is ready to suggest more comprehensive changes to the Legislature that are going to have to happen to make a difference.

"Without Citizens, 25 percent of the homeowners in this state would not have insurance, would not have a mortgage and would not be able to sell their homes or find loans," Gallagher said. "Citizens was supposed to be a small company, just to take care of those properties that no one else would write. Who would have ever thought that would become 25 percent of the housing market in Florida?"

Sen. Smith: Out-of-state companies don't want risks

Sen. Smith said he would like to attract out-of-state insurance companies to "suffer those kinds of losses, but it's not going to happen without taking interim steps."

"We should do some things immediately, this year Florida is going to have over $3 billion new dollars. A substantial portion of that will be from reconstruction caused by the hurricanes," Smith explained. "We need to identify those dollars from the reconstruction costs, approximately $500 million plus and put that money into Citizens right now to defray future assessments.

"That would keep down costs immediately and we would have that interim step," Smith said. "If we have additional dollars we ought to identify them and beyond those which are used, replenish Florida's CAT fund.

"Our catastrophic fund has been pulled down. It is important for the computation of insurance companies in terms of what the risk is going to be," Smith said.

Smith suggested the federal government has to come forward with a national catastrophic plan.

"There is no insurance company in the world, there is no state in this union that can absorb what happened on the Gulf Coast of Florida," Smith said. "If we do not do that we are going to have rates based on the risk of the longest and highest likely storm.

"Insurance companies will be computing risks on what happened on the Gulf coast and those will astronomically raise our rates. If we will take these steps I believe that we can immediately hold down those rates," Smith concluded.