You pay for Citizens Property insurance whether they cover you or not
Is Citizens Property Insurance Corp. your favorite charity? I’m donating (involuntarily) a little over $100 this year to cover the cost of claims paid out to Citizens’ customers, plus the claims of people who were insured by companies that went bankrupt. So are you, though the percentage of your contribution may vary. Many people don’t mind kicking in to help people on fixed or low incomes get their insurance claims paid. I really don’t. But my contribution to the cause isn’t earmarked for those individuals, and neither is yours. Every one of us with an insurance policy with a private company is helping to pay past insurance claims from all those with policies in state-run Citizens insurance and to pay off the borrowing debt from the Florida Hurricane Catastrophe Fund. Our contributions (read more on how the assessments work) help both those in need of this financial aid and those who don’t, such as people living in waterfront mansions who can – and should – be paying more for their property insurance protection. Fact: We are still paying claims from the 2005 hurricanes. Even the private insurers are still paying those claims, NOT because it takes that long but because Florida is the only state that allowed people five years to file hurricane-related claims. That made no sense, so the Legislature passed a law this year to trim the time back to three years. Keep in mind that most other states have a one year claims-filing deadline.
Last week, the CEO of Citizens floated the idea of taking at least part of the state-run company’s business and turning into a private enterprise. The reasoning behind this is to start getting Florida out of the insurance business, rather than deeper into it. For a company like Citizens, growth is not good.
Across the U.S., 31 states have what are called FAIR Plans (Fair Access to Insurance Requirements), and there are six Beach and Windstorm Plans, plus two state-run insurance companies – one in Florida and another in Louisiana. These programs provide insurance to high-risk policyholders who have difficulty finding coverage in the standard market. Florida Citizens is, by far, the largest such plan. It accounts for 61 percent of the total FAIR plans policy count in the country. Of the 2.5 million total policies (which includes homes and commercial properties) insured by the FAIR Plans in 2010, some 1.5 million were in Florida Citizens.
The Insurance Information Institute issued an updated report last week on state-run property insurers. Take a look at Residual Market Property Plans: From Markets of Last Resort to Markets of First Choice. Because these plans do not charge rates that reflect the true cost of risk, demand for the coverage they provide remains high. And, that just means your contribution can go higher, too, unless something is done to reverse the course.