Tom Lee wants Citizens to spell out risks to switching to private markets
Concerned that Florida customers of Citizens Property Insurance could be "duped" into trading their policy from the state-run carrier to a private insurer, a state senator on Monday called for the company to provide clearer warnings to customers about the unknowns involved.
"I've become convinced that the disclosures that are being provided to the consumers paint a very rosy picture of the private market -- they don’t tell you the whole story,'' said state Sen. Tom Lee, R-Brandon.
In a letter to Citizens CEO Barry Gilway and state insurance regulators, Lee urged Citizens executives to provide stronger disclosure warnings to include “the benefits and risks of remaining with Citizens or being insured in the private market.” Download 9-9 Lee Letter to Gilway
In the next month, nearly 400,000 Citizens customers will be receiving letters from private companies offering to provide them property insurance coverage as an alternative to Citizens. Customers will have 30 days to decide whether to join the new company or stay with Citizens. But the pressure is heavy for customers to switch.
Citizens has embarked on an aggressive push to shift business from the state-backed insurer to private companies in an effort to spread the risk in the event of another disastrous hurricane. If Citizens doesn’t have enough money to cover its claims, it is required to impose emergency assessment on non-Citizens policyholders throughout the state and surcharges on its policyholders to cover the costs. To achieve that goal, Citizens has embarked on a one-sided information campaign, Lee said, aimed at encouraging customers to drop their policies and he fears “people may be lulled into a false sense of security without any of the relevant details."
For example, the disclosure statements do not tell Citizens customers that while their initial premium rate with the private company may match what they were paying from Citizens, it could go up an unlimited amount when the policy is renewed. Citizens rates, by contrast, are capped at increases of up to 10 percent a year.
Customers also are not given details as to how the insurance coverage differs between Citizens and the new carrier and what impact the change in coverage may have on the premium, he said.
Also, “many policyholders who elect to accept private market insurance also likely do not fully understand that returning to Citizens can be a complex and difficult process,’’ Lee wrote.
Citizens spokesman Michael Peltier said Lee's concerns are valid and his letter is being reviewed to see what the response should be. He added that policyholders do have the option of switching back to Citizens up until the renewal date of their original Citizens policy.
"It’s not like the company is trying to throw people to the wolves,'' he said.
But Walter Casey, a homeowner in Spring Hill in Hernando County, told the Herald/Times on Monday that he received a letter from a private company that warned him of "surcharges of up to 45 percent" of his premium unless he switched. So he switched the policy last week and now is having second thoughts.
“The letter was really intimidating, saying the assessment was going to go up,'' Casey said. "I got jumpy and I ran. I was afraid. I’m worried about no coverage.”
Lee emphasized that he supports efforts to reduce the number of policies held by the state-run insurer, but he believes “Citizens should be agnostic” about whether policyholders switch.
Instead, he said, the disclosures “definitely lead people to want to pursue a private sector alternative to Citizen and while that may be the best thing for some consumers they will never have enough information to know that.”
Lee hopes that Citizens, and the Office of Insurance Regulation, provide more information to customers so they can make better informed decisions.
"I'm fine with depopulating, but not okay with duping people into abandoning Citizens,'' he said.