The new chief of Florida’s policyholder-backed property insurer Citizens Property Insurance offered no magic bullet to depopulate the insurer, but promised the insurer will charge higher rates for less coverage in order to encourage customers to buy elsewhere.
Newly-appointed Citizens President Barry Gilway offered the first glimpse into his thinking in remarks before Gov. Rick Scott and other Cabinet members.
Gilway, noting that he has only been on the job for one week, said he believes that while Citizens faces complex problems, it has the ability to come up with solutions.
“I do believe there are changes we can make that are in our control and we can make huge changes,” said Gilway, a former insurance consultant and Zurich North America executive.
Gilway said that as long as the insurer remains competitive with the private market by offering similar coverage at a similar rate it will remain the largest property insurer in the state.
He endorsed continuing the pullback in coverage that Citizens is already implementing, while finding a viable way to increase rates.
Gilway called that the issue of rates the “1,000 pound alligator in the room” but said if Citizens’ current rates are not substantially increased, it will remain competitive with the private market.
He said that the economic and political controversies surrounding the issue are not without concern.
Gilway told the Citizens board when they hired him that, “if rates are moved to complete adequacy, it has the terrible potential of absolutely destroying both home building and retail sales.”
The Citizens board is scheduled to hold a meeting on July 16 to unveil its latest actuarial projections and discuss the possibility of increasing new rates above the 10 percent annual cap on rates enacted by the legislature in 2009.
Already, some state officials are lining up in opposition to any major rate hike.
“You need to let time take you there on an appropriate glide path,” said Chief Financial Officer Jeff Atwater, who as a former state legislature supported the current 10 percent cap.
But rates and coverage changes alone will not solve the problem.
Gilway said that there needs to be greater incentives for private companies to write business. So far this year, he noted, private companies have removed 80,000 policies from Citizens and are on pace to double the number of policies they removed in 2011.
However, the real key is to inform the public so they no longer see Citizens as their first option of homeowners insurance.
“We need to do a better job of communicating with the public-at-large the full cost of being in Citizens,” Gilway said, who added that companies removing Citizens policies must be financially sound.
He said the insurer is currently working on a policyholder survey to gather more information on the public’s general knowledge and attitudes toward Citizens and the private market.
While depopulation issues remain front and center, Citizens is facing other challenges including sinkhole claims.
Gilway said that so far the insurer has received 1,600 sinkhole claims as compared to the 2,000 claims received last year during the same period. Still, he said, even with fewer claims the cost of sinkhole claims for the insurer is expected to be the same as last year. One reason for the increase is a rise in litigation.
“The attorney involvement has tripled,” Gilway said. “Where last year it was 50 claims, this year it is 150.”