When the question is how to shrink Florida’s state-backed home insurer, answers from insurance agents, insurer executives, state lawmakers, and others come down to increasing rates and shifting more policies to the private market.
Citizens Property Insurance Corp. held a three-hour so-called “Depopulation Summit,” which was billed as an open forum to discuss ways to reduce the insurer’s book of business with 1.45 million policyholders.
With more than 200 people in attendance, the summit offered many their first chance to publicly speak about depopulation. It became clear from the start, however, that there is no magic formula to accomplish that goal.
Citizens President Tom Grady, who is currently reaching out to consumer groups and the media around the state, said it is imperative that the insurer take steps to depopulate and reduce the possibility that all state homeowners could face assessments depending on the hurricane season.
“It doesn’t make sense to have so much risk in one company,” said Grady.
One area of note was the impact of a state law that allows either agents or their Citizens policyholders to reject a take-out offer from a private company. Some criticized the process as being too cumbersome since it requires numerous communications among Citizens, the agent, the private company, and the policyholder.
But the real issue is how rates and the ability of agents and consumers to reject the take-out offer are preventing more policies from being shifted to the private market.
American Integrity Insurance Co. President Bob Ritchie noted that American Integrity attempted to remove 20,000 to 25,000 policies only to see a great number of agents and Citizens policyholders reject the offer.
“We lost 12,000 policies, which was an opt-out percentage of 50 percent,” said Ritchie.
Homeowners Choice Insurance Co. President Paresh Patel said the insurer has done several Citizens take-outs with successful results. Still he said, while other issues are important, it all still comes down to price and insurers’ bottom lines.
“If companies could make money, there would be a line of people at the door,” said Patel.
While rates may be key, the discussion also focused on Citizens’ 9,000 agent force and whether that number should be cut back to funnel policies by decertifying agents who do not have at least one appointment with a private insurer.
The proposal would especially target State Farm agents who can only write for that company, which is no longer taking on policies in Florida. In the first 11 months of last year, State Farm agents who represent just 10 percent of Citizens agent force accounted for 20 percent of the 377,000 new policies placed in the insurer.
Grady said the proposal would also affect some independent agents and is an example of the kind of “tough love” Citizens may have to resort to if it is serious about reducing its policyholder rolls.
Citizens board member John Wortman took another tack , suggesting that the insurer needs to find ways to incentivize more agents to place business in the private market so that price is not the only factor when offering prospective clients a policy.
“We need to find a way to reward agents who don’t sell Citizens policies where there is an outside market,” Wortman said.
Another proposal called for decertifying Citizens so that it could no longer cover individuals in those areas of the state where it represents less than 50 percent of the market.
Senator Mike Fasano, R-New Port Richey, however, warned that while these changes may help Citizens, they may do little for Florida residents who have no other choice than to secure coverage from the insurer.
He said that officials have gingerly avoided discussing changes in Citizens coverage that have residents paying higher premiums for less coverage. They also stayed quiet about a recent proposal to increase rates for new business outside of a statutory cap that calls for annual rate increases of no more than 10 percent, he said.
“Take into account the impact the decisions you will make on every homeowner who is within Citizens,” Fasano said. “They have nowhere else to go.”
The summit also allowed for the first time other interest groups to have their say.
Realtors in particular are wary of Citizens making drastic changes given the potential impact on Florida’s housing market, which has been in a severe slump since the 2008 economic downturn.
The Citizens Board of Governors is expected to draw up a specific list of internal and legislative proposals at its July meeting.