Make us your home page

Consumers cry foul over Citizens' shift to low-rated firms

Confused and angry, some Citizens Property Insurance policyholders charge that the state is using a "sneaky" ploy to move them out of the state-run insurer into questionable start-up companies.

Their concerns have prompted consumer advocates and insurance industry observers to issue a warning: Do your homework.

Since January, Citizens policyholders have increasingly received letters from small, private insurers stating that unless the homeowners "opt out," their policies will automatically be transferred from the state-run company to a private firm.

Bill Newton, executive director of the Florida Consumer Action Network, says homeowners should not simply take whatever company is handed to them without thoroughly researching the firm. He added that the Office of Insurance Regulation must do its job to ensure that any company taking policies out of Citizens is sound.

"They need to be thoroughly vetted by OIR, especially now with the problems on Wall Street," Newton said. "Homeowners have a responsibility to shop around."

Former Rep. Donald Brown, R-DeFuniak Springs, an insurance agent who was the 2008 House Insurance Committee chairman, says the Citizens policyholders are right. Brown, whom some criticize as favoring large insurers, said the state created the "opt out" provision as a way to ensure wide participation. It requires action by homeowners that many may not take before it is too late.

"There has been, in my opinion, a strategy over the recent past to move risk as an overall political strategy," Brown said.

Homeowners say the opt out letters look like junk mail from an insurance company seeking your business, not a notice of a significant change in their homeowners insurance coverage.

"I thought it was very sneaky the way they did this," said Richard Mead, a 48-year-old computer consultant in Clearwater. "I've just been changed to a small insurance company, which really makes me nervous. I have no idea what their credibility is. I'm switching back to Citizens."

Retired schoolteacher Vicky Jones of Clearwater couldn't be angrier about the takeout process. She said she and her daughter, who is disabled, were fine with Citizens for coverage of their two houses.

But since Jones and her daughter received takeout notices, she has been spending weeks trying to "opt out."

"Why should this be such a hassle to me, when I made my decision back in June when my insurance expired and I paid for Citizens?" Jones asked. "It should not be somebody else's choice about my home being insured. It should be my choice."

Jerry Grimes, a 50-year-old sales manager from Tampa, was switched to a small insurer but wants to go back to Citizens. "I think it's pretty much a poor way of doing business.

"I'm very disappointed that a state-run program would be so irresponsible. I don't want to find out down the road that one of these smaller companies goes belly up."

Ten of the 14 companies that have been approved to take out hundreds of thousands of policies from Citizens this year received grades of "D" and "E" from's rating division, formerly the Weiss Rating service, an independent firm. The U.S. General Accountability Office has ranked the rating company No. 1 among rating services for its accuracy.

Rating service A.M. Best also added takeout company Argus Fire & Casualty Insurance Co. to a list of seven companies "under review with negative implications." Argus received a "D" from, ranking it "weak" for fiscal stability.


Part of the concern by rating agencies is the backup insurance held by the companies. The Florida Hurricane Catastrophe Fund, which warned in October that the world economic crisis is limiting its access to money, holds part if not all the reinsurance for the takeouts.

In a letter to the St. Petersburg Times, Tom Zutell, a spokesman for the Office of Insurance Regulation, said a Times story last week about low grades from's ratings "was irresponsible and may have caused unnecessary anxiety among Citizens' policyholders contemplating a takeout offer. Insurance Commissioner (Kevin) McCarty would never allow a financially unsound company to remove policies from Citizens."

Zutell said Florida has some of the most stringent licensing requirements in the nation.

The law also requires new residential property insurers to have the greater of $5-million or 10 percent of total liabilities in surplus when they are licensed, but Zutell said Florida regulators have required double that for most new companies.

Brown disagreed about the companies' fiscal stability. "They're very thinly capitalized; they're very vulnerable to a major storm. These small companies rarely buy reinsurance through anything but the Cat Fund. The last report said the Cat Fund is $14-billion in the hole in their finance plan."

Added Lynne McChristian, a spokeswoman for Insurance Information Institute, a New York organization that provides information and analysis about the insurance industry: "Some of these takeout companies have not been tested. The key point is we've had three seasons without hurricanes. It's given those companies capital, but is it enough?"

Ivan Penn can be reached at or (727) 892-2332.

Consumers cry foul over Citizens' shift to low-rated firms 11/06/08 [Last modified: Monday, November 10, 2008 3:39pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times


Join the discussion: Click to view comments, add yours

  1. SeaWorld shares drop Monday to 2017 low after disclosure of federal subpoena


    The Orlando parent company of SeaWorld and Busch Gardens theme parks saw its stock drop 3.5 percent Monday to $15.10, its lowest price of this year.

    Killer whales perform at Shamu Stadium at SeaWorld in Orlando in 2011, before public pressure was placed on the theme park company to curtail its orca shows.SeaWorld has since announced an end to the traditional killer whale entertainment  at its theme parks. [AP Photo/Phelan M. Ebenhack]
  2. Rick Scott appoints 'my friend,' Jimmy Patronis, as Florida CFO

    State Roundup
    Rick Scott appoints Jimmy Patronis (background) as CFO. [STEVE BOUSQUET | Tampa Bay Times]
  3. Local gas prices plummet as Fourth of July holiday travel approaches


    TAMPA — Local gas prices are enjoying an unseasonal dip around the $2 mark just in time for the hectic Fourth of July holiday travel weekend.

    The price of regular unleaded gasoline has dropped to $1.99 at a Rally station on Pasadena Ave. South and Gulfport Boulevard South, South Pasadena.
[SCOTT KEELER   |   Times]

  4. Air bag recalls, lawsuits lead Takata to file for bankruptcy


    Shattered by recall costs and lawsuits, Japanese air bag maker Takata Corp. filed Monday for bankruptcy protection in Tokyo and the U.S., saying it was the only way it could keep on supplying replacements for faulty air bag inflators linked to the deaths of at least 16 people.

    Japanese air bag maker Takata Corp. CEO Shigehisa Takada bows during a press conference in Tokyo on Monday. Takata has filed for bankruptcy protection in Tokyo and the U.S., overwhelmed by lawsuits and recall costs related to its production of defective air bag inflators.
[(AP Photo/Shizuo Kambayashi]
  5. Airbag maker Takata bankruptcy filing expected in Japan, U.S.


    DETROIT — Japanese airbag maker Takata Corp. has filed for bankruptcy protection in Tokyo and the U.S., overwhelmed by lawsuits and recall costs related to its production of faulty air bag inflators.