Florida has enjoyed a record seven years without a hurricane, but there is no good news on the horizon. Homeowners are facing ever-increasing insurance premiums, Citizens Property Insurance is still trying to shed policies and too many legislators are more interested in helping the industry than protecting consumers. Instead of jeopardizing the economic recovery with more drastic changes that could dramatically raise premiums, the Legislature should limit its interference and keep Citizens on its steady glide path to firmer financial footing.
The state-run Citizens has received more than its share of legitimate criticism for fat expense accounts, luxury hotel rooms and salary raises for executives. There have been critical audits, reports of unprofessional behavior and misguided efforts to make the insurer as unattractive to consumers as possible. Pile on top of that significant cuts in coverage even as premiums continue to rise, skyrocketing costs for sinkhole coverage and thousands of reinspections that led to the loss of discounts for hurricane-proofing. But despite the sky-is-falling rhetoric from some lawmakers and private insurers, the view is not all gloomy.
Citizens has reduced its number of policies by some 200,000 over the last year and is down to 1.3 million policies, which still makes it the largest property insurer in Florida. It has a record amount of cash, more than $6 billion, and it can cover losses from a 1-in-58-year hurricane without any assessments. It can cover losses from a 1-in-72-year hurricane with assessments only on Citizens policyholders. Yet some legislators warn of catastrophe because covering claims for a 1-in-100-year storm would require 30 years of additional assessments on all sorts of policyholders. The idea that Citizens should quickly raise premiums high enough so the insurer can cover claims from a once-a-century hurricane without any assessments after the storm is unrealistic and would force thousands of homeowners to sell because they couldn't afford the insurance.
Yet private insurers and their allies continue to pressure legislators to raise Citizens rates and force their customers into more expensive coverage with untested private companies. Associated Industries of Florida is particularly devious, distributing maps showing which legislative districts have fewer than one-third of their housing units insured by Citizens with the headline: "Hurricane Taxes: Do you pay more than your fair share?" This is a scare tactic designed to pit inland lawmakers against those from Tampa Bay and Southeast Florida by fanning fears about post-hurricane assessments if Citizens needs more money to pay claims. Inland lawmakers should be wary of complaining about sharing the pain after a major hurricane. Their districts share the benefits now of tax revenue from a tourism economy and economic growth in coastal counties.
There are some good ideas in Tallahassee, including creating a clearinghouse to compare insurance rates for homeowners before they sign up with Citizens. The state's hurricane catastrophe fund, which provides reinsurance to Citizens and private insurers, could be reduced a bit as the private market is flush with capital. But lawmakers should keep the 10 percent cap on premium increases for Citizens policies and avoid schemes to force Citizens policyholders into start-up private insurers with no track records.