Sunday, September 24, 2023

Florida’s Property Insurance Landscape: Citizens Property Insurance Corp. and the Private Market

Florida’s property insurance market is undergoing significant changes, with a focus on the state-backed insurer, Citizens Property Insurance Corp., and its recent interactions with private insurance companies.

We delve into the intricacies of these changes, the reasons behind them, and their implications for Florida homeowners.

Citizens Property Insurance Corp. and the Private Market

Citizens Property Insurance Corp., traditionally known as the insurer of last resort for Florida homeowners, has been at the center of the state’s insurance discussions.

Established to provide coverage when residents couldn’t find it in the private market, Citizens has seen its policy count swell over the years, especially after a series of hurricanes and aggressive litigation practices.

As of April, Citizens held over one million policies, with nearly 300,000 from Tampa Bay homeowners alone1.

The growth of Citizens is concerning for several reasons. For one, its rates are not in sync with private insurers’ pricing practices.

Mark Friedlander, a spokesperson for the Insurance Information Institute, highlighted that Citizens offers premiums that are approximately 40% cheaper than the private market3. This discrepancy makes Citizens an attractive option for many, but it also means that the insurer is taking on a significant amount of risk.

The “Depopulation” Effort

To address the bloating of Citizens, the Florida Legislature and Governor Ron DeSantis have been pushing for its “depopulation”. The idea is to transfer policies from Citizens to private insurers, thereby reducing the state insurer’s risk exposure1.

A recent manifestation of this effort is the Tampa-based insurer, Slide, set to take over as many as 25,000 homeowners policies from Citizens3.

While this move aims to relieve the state-backed insurer, experts warn it could come at a cost to consumers. The reason? The transition to the private market might result in higher premiums for homeowners.

The Implications for Homeowners

The transition process, known as “depopulation”, has specific guidelines.

For instance, homeowners might not be able to renew their coverage with Citizens if they receive an offer from a private insurer that’s no more than 20% more expensive than their current policy2.

This means that a homeowner could receive an offer from a company like Slide that’s over 10% more expensive than their current Citizens’ policy. While they aren’t required to accept the offer, they won’t be able to renew with Citizens either.

Such changes have left many homeowners in a dilemma.

On one hand, there’s the allure of cheaper premiums with Citizens. On the other, there’s the uncertainty of potential rate hikes and the possibility of being shifted to a private insurer1.

Dustyn Shroff, VP of GreatFlorida Insurance, says, “The insurance landscape in Florida is as dynamic as its weather. It’s essential for homeowners to stay informed and be proactive in understanding their coverage options. Our Independent Agents at GreatFlorida Insurance can help Florida Homeowners find an affordable policy from our many partnered carriers, including Slide.”

Looking Ahead

The overarching goal behind these changes is to stabilize Florida’s insurance market.

However, the road ahead is fraught with challenges. If a major hurricane were to hit areas like Miami, where many of Citizens’ policies are concentrated, it could deplete the insurer’s claims-paying funds3.

Such a scenario would trigger an emergency surcharge, colloquially known as a “hurricane tax”, impacting both Citizens and non-Citizens policyholders.

Moreover, while efforts are being made to reduce Citizens’ policy count, the insurer is still on track to surpass its all-time high of 1.5 million customers by the end of the year3. This growth, coupled with the private market’s instability, paints a complex picture for Florida’s insurance future.

While the depopulation efforts aim to stabilize the market and reduce the state’s risk, homeowners are advised to stay informed, understand their options, and consult with their insurance agents to navigate these changing tides.

  1. News4Jax
  2. WESH
  3. Axios
Dustyn Shroff
Dustyn Shroff
Vice President at GreatFlorida Insurance

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