Citizens’ policy holders grateful
There aren’t too many things to be grateful for when it comes to homeowner’s insurance in Florida, but you may start feeling differently if you’re one of the lucky ones to have a current Citizens policy.
Lucky and Citizens is painful to use in the same sentence, but this month a lot of Florida residents who have homeowner’s insurance with Citizens Insurance, the state run company, may be feeling exactly that way. The Florida Senate Bill #1770 which has passed the Florida Senate will actually protect existing policies while sacrificing new policyholders.
The bill, which has had bipartisan support in Tallahassee, has glided through the Senate bill process and is supported by most legislators including Gov. Rick Scott. The essence of Bill #1770 places the onus on new Citizens policyholders to provide additional funds to Citizens Insurance in the event of “the big one.”
The legislators and others support of the bill say it shields current customers from the largest rate hikes and only new Citizens policyholders would pay the higher rates. But that includes people who get dropped by their insurance companies and are forced into Citizens as well as previous Citizens policyholders who need to rejoin Citizens.
The bill forces homeowners out of Citizens if a private company is willing to cover their home for 15 percent more than what Citizens is charging as part of Citizens’ effort to depopulate Citizens Insurance. If the private insurer later increases rates the homeowner would not be able to go back to Citizens at their former rate but would be considered a new customer. Sounds like Catch 22 on steroids.
And what exactly will those rate increases be? Citizens President Barry Gilway, who previously was none too anxious to outline these increases, now says that insurance bills could increase more than 60 percent up to an estimated 71.9 percent in Miami-Dade County varying in certain areas of the state. The most exposed areas of the state of course include South Florida and Tampa Bay.
In addition, Gilway said that after seven years without a hurricane, Citizens Insurance is in a financial position that will be able to pay for a 1 in 50 year storm approximately the level of Hurricane Andrew. He also pointed out that it would take two of these storms or a 1 in 100 year storm to wipe out Citizens’ resources.
After the Senate passed the bill, it was sent to the Florida House which quickly passed a more modest version that is a little easier financially on policyholders. Many of the goals of both bills are the same, focusing on the ultimate goal of reducing the number of Citizens’ policyholders. The next step is for both the House and the Senate to work together on details, which may or may not be accomplished before the current session ends.
So why is this happening and what will the effect be on the real estate market? It’s happening because there are no elections this year and even the governor doesn’t face reelection until 2014, which gives legislators a path to get some more money for Citizens without jeopardizing them politically.
What impact the approval of the bill will have on new residents to Florida or just new policyholders is a hard call to make. Will the increased premiums just become the new reality and part of the price to pay for living surrounded by tropical water or will it actually scare away buyers? Let’s hope Florida’s assets outweigh its insurance issues.
If you have a Citizens policy now you’re among the lucky. Probably something you never would have thought. Be grateful for little things.