Florida Department of Financial Services

Publication Date: 11/27/05

We can't prove we're numero uno, but Florida has to at least be among the top states for property insurance woes, complete with wacky problems and implausible solutions.

If your own property insurance company has not raised your rate by double digits thus far -- wait. Most of the 20 or so top insurers in the state have rate hike requests either OK'd or pending.

But Florida's property owners will also pay premiums to another insurance company most may have never heard of.

Citizens Property Insurance Corp. is a state-created "insurer of last resort." It was birthed by the Legislature in 2002 to provide property insurance to those citizens who could not get private insurance. It started out as a small corporation, but has morphed into the state's second largest carrier, behind State Farm, with 800,000 customers in just three years.

How can it affect your insurance? If the corporation loses money, which it did, and does now with alarming regularity, the deficit is made up by a surcharge. This is underwritten by private property insurance policyholders statewide -- and billed to you, courtesy of your private insurer.

Last year, Citizens lost around $516 million. This year it is expected to lose over $1 billion -- which bean-counters expect will translate into an 11 percent rake hike for private policy holders across the state.

Citizens Property Insurance, by law, must charge more for its insurance than private providers -- a non-competition arrangement. It is seeking a 16 percent hike for its own policyholders immediately. But its board figures that it will have to come up with an 80 percent raise in rates to remain "actuarially solvent."

Meanwhile, Florida's Chief Financial Officer Tom Gallagher has opened a criminal fraud probe into the company's financials. CEO Paul Hulsebusch resigned in September amid allegations of bribery and a scam to form a private insurance company that would cherry-pick the best policy applications received by Citizens. The FBI is involved.

This is just a thought, but Florida officials continue to wring their hands at the massive build-up of our coastal areas. Since Citizens covers the higher-risk policies, and those policies cover generally coastal areas, it may behoove the state to radically change or end the subsidies. The current system encourages more coastal building -- bad -- and subjects property owners who have nothing whatever to do with that lucrative speculation to the risk -- bad again.

-- Jim Sutton