With its policy count near 1.5 million and growing, officials of the state-backed property insurer went to Tampa Friday to get ideas on how to reduce its exposure and send customers back to the private market.
They found out from industry representatives that the goal is laudable, but also a tall order.
Among a list of options, representatives from insurance companies, agents and take-out companies told governing board members of Citizens Property Insurance Corp. that they need to do a better job of marketing alternatives to what has become the largest property insurer in the state.
Private market representatives also said the time may have come for Citizens to reduce its numbers by exiting markets where viable private alternatives would exist if given a chance to compete. Citizens, meanwhile, would maintain its role as insurer of last resort in areas of the state where private insurers fear to tread.
"Maybe it's time for a little tough love," said Dulce Suarez-Resnick, a South Florida agent and marketing director for the Latin American Association of Insurance Agents. "Maybe it's time to say your policy is coming out of Citizens and you can't stay."
That's actually already been tried on some level. Earlier this year the Legislature considered but ultimately rejected -- a proposal that would have allowed surplus lines insurers to remove policies from Citizens in an effort to reduce the state company's exposure. But wary lawmakers added consumer protections and backers eventually said they had changed the bill to the point that surplus lines companies wouldn't end up getting many of the policies. The bill was changed from a proposal that would have automatically switched consumers to the new companies to one that would have been an opt-in, for example, and backers said many consumers likely wouldn't make the switch. The bill failed to gain final approval.
A survey of insurers conducted by Citizens found inadequate rates at the top of the list of reasons why other private insurers don't return to the market and write policies. Other common responses, in order of importance, were the lack and cost of reinsurance, the ability of insurers to select policies without regard to geographic region and the loss ratios of policies being assumed.
The combination of factors is making it difficult for even the most aggressive companies to take policies from Citizens.
Paresh Patel, CEO of Homeowners Choice Property and Casualty Insurance Co., estimated that two-thirds of Citizens policyholders are paying rates that are about right when compared to the risk, leaving only about 500,000 policies in which premiums are far below actuarially sound rates.
By providing incentives to go after the 1 million policyholders that remain, Citizens could dramatically lower its exposure, which now totals about $500 billion, said Patel, whose company over the years has taken more than 110,000 policies from Citizens.
Another hurdle for businesses entering the state is the lack of confidence many Citizens policyholders have on potential take-out companies. The result is that customers are opting to stay within Citizens, which is subsidized by assessments paid by all policyholders in the event of a particularly devastating storm.
Lisa Miller, a former deputy insurance commissioner who works as a lobbyist and consultant for insurers, said one tool would be for Citizens to co-brand insurance products to bolster confidence for take-out companies seeking to enter the market.
"The leaders of our state need to come up to the plate to say to the citizens of Florida that our private market is strong," Miller said.
