The state’s “insurer of last resort” added more than 100,000 new policies between February and May – the result of continued shakeout by private companies looking to sell off policies that are likely to cause costly damage.
Citizens Property Insurance Corp. Established to ensure Floridians can find insurance when no one else wants it, it is becoming the only choice for customers whose previous businesses have declined to renew their policies or hit them so badly with premium increases that they are eligible were to switch.
The strong growth in policies, especially at the start of the hurricane season, increases the risk that citizens’ $ 6.4 billion surplus will not be able to cover all claims in the event of a disaster in South Florida or other populated areas of the state meets. If so, Citizens customers, and possibly all Florida property insurance customers, would have to pay extra payments to cover any shortfalls.
“The market is upside down,” said Ryan Papy, president of Palmetto-based agency Keyes Insurance. “We write hundreds of citizen guidelines every month. About 90% of our new policies are [with] Citizens. Unfortunately, we are now seeing that current customers are being forwarded to citizens. “
From February to May, 103,972 new customers were added, including 54,770 from Broward, Palm Beach and Miami-Dade counties. Industry representatives say that further growth is expected until 2022.
The latest customers came from companies with large market shares in South Florida, according to a list compiled by Citizens. At the top of the list were Universal Property & Casualty (3,136 customers), People’s Trust (2,459), Florida Peninsula (2,260) and Federated National (1,972) and United Property & Casualty (1,900). These sums could be higher because sales agents only listed the previous insurers for 45% of new customers.
Dulce Suarez-Resnick, vice president of Miami-based insurance agency Acentria Insurance, said, “In the 36 years I’ve been an agent in South Florida, the market has never been this bad – not even in 2006 and 2007 after the 2004- Hurricanes in 2005, when eight storms ravaged our state. “
The number of citizens has been growing since the third quarter of 2019 when the number of policies bottomed out at 423,000. This milestone marked the end of a seven year decline from a high of 1.5 million policies in 2012.
As of June 18, the company had 626,607 policies again, up about 6,000 a week.
“The industry is facing a real dilemma,” said Barry Gillway, President and CEO of Citizens, speaking to the company’s Market Accountability Advisory Committee on Wednesday. “Your profitability remains at an unsustainable level.”
Florida-based insurers have been losing money in operations for five years, Gilway said. Taken together, they recorded net operating losses of $ 1.6 billion last year and $ 269 million this year, he said.
Insurers blame a decade-long surge in costly lawsuits in South Florida, heavier-than-expected claims after Hurricanes Irma and Michael and other recent storms, and an explosion of roof damage in the Orlando area and southwestern state.
These factors also contributed to an increase in reinsurance costs, the types of insurance that insurance companies must take out to ensure they can pay all claims after a disaster. Reinsurers often require insurance companies to offset their risks by reducing policy concentrations in high risk areas.
In 2020, many customers were shocked to receive notices that their tariffs would be increased up to 45%, that their policies would not be renewed because they were considered too risky, or that their homes would have to pass inspections to qualify to retain insurance coverage.
In May, state insurance regulators allowed Universal Insurance North America, Gulfstream Property & Casualty, and Southern Fidelity to cancel or send non-renewal notices to more than 50,000 customers. To date, Citizens has taken out about 3,000 of these policies, Gilway said.
Homes that are ripe for rejection include homes with older roofs, homes that don’t meet current building codes, and homes with older plumbing or electrical systems, said Paul Handerhan, president of the consumer-oriented federal association for insurance reform. Homeowners with poor credit ratings or who have made claims in the past could also be left in the lurch, he said.
Sometimes insurers only cancel policies because they need to reduce their concentration of policies in high risk regions like South Florida, which is home to 54% of citizens’ policies.
Gilway expects citizens to hit 800,000 policies by the first quarter of 2022 before reforms enacted by state lawmaker and Governor Ron DeSantis earlier this year reduce losses for private insurers.
These reforms include measures designed to make citizens less attractive to customers considering switching from their current insurer.
One that goes into effect July 1 will exclude some policyholders from switching by requiring a competing offer to exceed the Citizen Tariff by 20% instead of the current 15%. Another will raise the upper limit of the average annual rate of increase for citizens from now 10% by one percentage point each year until it reaches 15%.
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