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Citizens Property Insurance Corp.'s Surprisingly Successful Evolution

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The Tampa Tribune

Published: November 2, 2007

Citizens Property Insurance Corp. is no longer the state's insurer of last resort. With 1.4 million policies, it's the largest insurer in Florida.

We've never liked the idea of the state entering the insurance business and would prefer that the market meet the public's needs. But The Wall Street Journal goes too far when it accuses Gov. Charlie Crist of socialism for approving the expansion of Citizens, which now covers other perils as well as wind damage.

After all, the insurance market has hardly been competitive here of late.

The largest insurance companies - State Farm, Allstate, Nationwide - don't want to write more policies in Florida. And while some smaller companies have entered the market and see a chance to make money here, most property owners in areas at high risk of significant wind damage can't get insurance coverage except through Citizens.

So what would The Wall Street Journal have Crist and lawmakers do? Let people go without coverage? Or force homeowners to pay excessive rates to an industry that is under-serving the state?

Given the circumstances, the state responded sensibly.

A few years ago the idea of being forced into Citizens made a lot of people nervous, but three years since the hurricanes of 2004, the company has evolved impressively.

Citizens wasn't ready for Charley, Frances, Ivan or Jeanne. It didn't have the infrastructure to respond effectively to such catastrophes. State Farm, for example, could bring in independent adjusters from its nationwide employee base, but Citizens didn't have the staff to service customers.

The company changed its response model and did a far better job after the storms of 2005. It developed a framework to juggle its many hats - adjusting claims, processing applications and issuing policies.

The 900 employees of Citizens understand it is a creature of the Legislature formed in furtherance of the public good.

When the Legislature met in a special session last January to deal with the public outcry about soaring property insurance rates, lawmakers saw Citizens in a new light. Rather than simply being the insurer of last resort, it could provide Floridians an alternative in an insurance market that offered few choices.

So today, Citizens no longer is required to charge the highest rates in the state. It can sell to customers who would be served by private companies - if the private policy would be 15 percent or more than Citizens would charge.

Citizens has become healthier financially, with an expected year-end surplus, if no hurricane hits, of about $3 billion.

It's true the state has taken a risk with Citizens. The company doesn't have the reserves today to pay the claims if the big one strikes, and all policyholders in Florida would be subject to assessments to cover the cost.

But without a catastrophic storm, and with the ability to sell insurance to cover other perils, Citizens will make money to put away for that rainy day.

Some 8,700 private agents sell Citizens today, but in a commission-driven business, they don't always tell consumers they have a choice to buy one policy covering all perils when they can make more money selling a separate one. The state should require agents selling Citizens to let eligible homeowners in on the secret. Officials with Citizens estimate the company would earn between $300 and $400 million a year more - money that could be used for future payouts.

With any good luck, more private insurers will enter the market and Citizens' numbers will shrink. But it is giving homeowners much-needed protection and relief and it has probably become a permanent fixture on Florida's hurricane-prone landscape.

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