By Daniel A. Espinosa, Esq.
Citizens Property Insurance Corporation (“Citizens”) has approximately 1.5 million insurance policies in Florida. As private insurers cut back the number of policies written in Florida, other insurance companies no longer insure Florida homeowners. Despite Citizens having a healthy reserve fund of over $6 billion, it is looking to shift as many as 210,000 policies to other Florida insurance companies.
Florida’s Office of Insurance Regulation has approved American Integrity, Homeowners Choice, Southern Oak, Southern Fidelity Property & Casualty, and Florida Peninsula to participate in the first round of what has been termed the “takeout pool.” All of these insurance companies are private carriers. The reason for this is to guarantee solvency in the event more than one storm (i.e. tropical storm, hurricane, etc.) hits Florida in the same year. Remember 2005 when Florida was hit by 3 storms in 3 months?
It is no secret insurance rates have skyrocketed across the board. This is true not only for those affected by the storm, but also for all policyholders living in Doral. Most of the insurance companies in the takeout pool are newer insurance companies, which explains why their respective ratings range from high to low. According to Demotech, Inc., the five insurance companies in the takeout pool are “A” rated—a good rating. However, Weiss Ratings has given four of the five insurance companies in the takeout pool a poor rating.
Doral Residents beware! If you switch to one of the takeout insurance companies in the middle of your policy period, your current coverage and rates will extend to the new insurance company. This may not seem as good as it sounds, though. Upon renewal, you will receive a new and, likely increased, insurance rate from one of the approved takeout insurance companies. Be mindful that Citizens is the only insurer in Florida that is required to cap rate increases at 10% per year. Recently, Florida regulators have granted much higher double-digit rate increases to private insurance companies; so with all these poor ratings and higher rates, logic would dictate that staying with Citizens is the economically sound decision. Not so fast. Remaining with Citizens has its drawbacks, too.
Florida law has specific provisions in the event a major disaster depletes Citizens’ reserves. For example, if Citizens suffers a major deficit after a storm, Citizens’ policyholders may end up paying as much as a 45% premium surcharge for one year. To add insult to injury, the State of Florida could then levy assessments on non-Citizens insurance policies statewide up to 3% of the premium or 3% of the deficit, whichever is greater. If that is still not enough, a third assessment of 10% of the premium per account—maximum of 30%—could be applied to all Florida insurance policies, both Citizens and non-Citizens. Rates for the majority of Citizens’ policies will be inching upward because Florida insurance regulators approved a 10.8 percent rate hike statewide.
Doral residents insured with Citizens have two options: remain with Citizens, or move on to one of the private insurers. Doral residents, if you wish to remain with Citizens, your time to do so will soon expire. You must submit to Citizens the proper form(s) bearing your signature on or before November 6, 2012. More importantly, you must send it by mail or fax. Otherwise, one of the takeout insurance companies will assume the policy on your normal renewal date. The worst part is you will not be allowed to select the takeout insurance company of your choice.
As a result, Doral residents insured with Citizens should calendar the November 6, 2012, deadline and consider consulting a licensed attorney. You can always search for a different provider and enlist the help of an insurance broker, but good luck with that. If Citizens fools you once, shame on them. But if Citizens fools you twice, shame on you.
Daniel A. Espinosa, Esq., is a founding partner of ESPINOSA | JOMARRON, a full-service law firm in Miami’s Midtown area with an exclusive property insurance department advocating For The Insured.™ For more information, you can e-mail him at despinosa@4TheInsured.com. Feedback, comments, and questions are welcomed.