It's been clear for years that brand-name property insurance companies will not cover more Florida homeowners no matter how high their premiums are set. But rather than create a different model for property insurance, the state-run Citizens Property Insurance Corp. has a new brainstorm to tempt the private market: bribes. The idea is as offensive as that description, and it ought to be abandoned before private insurers start naming their price.
Out of touch in Tallahassee, Gov. Rick Scott and many Republican legislators continue to sing the praises of competition and the private market place in a situation where free enterprise isn't working. Property insurance is either not accessible or not affordable in much of the state, yet homeowners with mortgages are required to purchase coverage. Now Citizens is pondering whether to pay private insurers to take some of its 1.4 million policies, presumably those with the least risk.
The bottom line for consumers: Millions of dollars in premiums they have paid to Citizens would be sent to private insurers. Then their policies would be transferred to those private insurers — and the private insurers would dramatically raise their rates. Nothing about that corporate welfare strategy is fair to Floridians who shouldn't be gouged based on fuzzy calculations about what might happen in a 1-in-100-year hurricane.
Florida has been on a lucky streak, with no hurricanes striking the state in six years. That has enabled Citizens to build more than $5.6 billion in reserves as it continues to raise premiums by up to the 10 percent cap set by the Legislature. That is a reasonable approach to gradually raise rates in a way that is predictable and most homeowners can manage. In fact, the state's insurance consumer advocate projects that Citizens could cover claims now from a 1-in-25-year hurricane without making any poststorm assessments while some private insurers could fail. It makes no sense to use premiums collected by Citizens to pay private insurers to take on Citizens customers — and then force those customers to pay more for coverage that may not be there when they need it.
Yet the governor continues to pressure Citizens to reduce its number of policyholders, and Citizens is determined to drive away its customers by making their lives as miserable as possible. It's one thing to seek to raise rates to roughly the 10 percent cap, as the insurer's board voted last week. But Citizens also is significantly scaling back what sorts of losses it will cover, unconscionably raising rates for sinkhole coverage and aggressively reinspecting homes to raise millions in premiums under the guise of weeding out fraud in hurricane mitigation discounts. At least the Citizens board rejected a sneaky plan last week to lift the rate cap on new policies and to limit nonflood water damage coverage to an inadequate $15,000.
Citizens is on a positive glide path, despite the reckless use by Scott and others of wild estimates of damage by record hurricanes that wipe out the state. The reality is that Florida homeowners cannot possibly afford premiums high enough to cover up-front the damage from 1-in-100-year hurricanes. The state always will need federal aid, assessments on policies and other assistance to help rebuild after a major catastrophe. Bribing private insurers with money paid by Citizens policyholders to take their policies away from Citizens and then jack up the rates is not the answer.