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People in and out of Citizens Property Insurance had a bad year in the Florida Legislature

Published Mar. 25, 2016

TALLAHASSEE — There is little relief coming for homeowners facing crushing rate increases after being nudged (some would say shoved) out of the state-run property insurance company. And those left in Citizens Property Insurance Corp. could be facing big increases of their own because of another failure in the Legislature.

In short, it was a bad year in the Florida Legislature for consumers both in and out of Citizens. On both fronts legislators had bills lined up in the final days of the Legislature that would have addressed both topics. But when the dust settled and the annual session ended earlier this month, the bill to help those moved out of Citizens had been neutered and the other to address increasing water claims against Citizens that threaten to spike rates was killed altogether.

Some good consumer protections survived, but State Sen. Anitere Flores, R-Miami, admitted that it was with a "heavy heart" she had to agree to kill her proposal that would have allowed home­owners steered out of Citizens to return within three years if they get hit with some of the astronomical rate increases she said homeowners are often facing after they leave Citizens. She cited examples of homeowners in Miami-Dade getting hit with 200 percent premium increases just a year or two after being kicked out of Citizens.

It's the second time the idea has been close to the finish line, only to suffer an unexpected demise. In 2015, similar legislation passed the Legislature unanimously. But Gov. Rick Scott vetoed the plan, worried that it would reverse the state's efforts to shrink the size of Citizens.

Since 2012, the state has been aggressively reducing the number of people in Citizens. After a flurry of hurricanes and tropical storms in the mid 2000s, Citizens exploded in size as major insurers cut back in Florida. Citizens, which was created to be the state's insurer of last resort, became the state's largest insurance company with 1.5 million policies.

That put political pressure on lawmakers to lure private companies back into the market and shrink Citizens. The more policies Citizens carries, the greater the potential financial hit on everyone in the state who has insurance. Under state law, Citizens can bill even non-Citizens policyholders if it runs out of cash to pay damage claims after a major storm.

Citizens has trimmed down to fewer than 500,000 policies as of March, but its tactics have been widely criticized and helped provoke Flores' legislation the last two years. Many customers said they were switched to private carriers without their knowledge because the official notice letters looked like junk mail and were from new carriers people did not recognize. To avoid being switched, Citizens puts the onus on customers to fill out an "opt-out" form, which many consumers said was hard to find.

Even after Flores' bill was vetoed last year, Citizens took steps to change its procedures. It now sends notices to customers ahead of time to warn them to look out for take-out offers from private companies. And the form to "opt-out" is prominently featured on Citizens' website so it is easier to find.

Still, Flores said that wasn't enough. She said her bill this year was meant to further clean up the procedures and give consumers a way to get back into Citizens when their rates in the private carriers get out of control.

Supporters of Flores' legislation have disputed Scott's rationale for his veto, saying that by rejecting the idea it makes it harder to get consumers to leave Citizens knowing take-out companies could still hit them with big increases down the road.

"There is a fear of the unknown," said Jay Neal, the president of the Florida Association for Insurance Reform.

Neal said if consumers know they can come back, it will likely make them more willing to shift from Citizens to a private carrier, especially one that is not a familiar household name. Without it, he said Citizens will struggle to keep up the pace of depopulation.

But because of last year's veto, State Rep. Kathleen Passidomo, R-Naples, told her colleagues in the final days of the session that taking Flores' approach would result in another veto and stripped the language from the bill that ultimately passed. She wasn't alone in that thinking: State Rep. Jose Javier Rodriguez, D-Miami, said there was enough uncertainty about what the governor was going to do that he voted for the bill without the Flores language.

"Unfortunately, we went as far as we could go," said Rodriguez, a co-sponsor on the bill.

Rodriguez said there have been a lot of problems with how the transition from Citizens to private companies has been managed and it has triggered bipartisan support to change it.

"This take-out process has been a disaster," he said.

What did get passed will require Citizens to be responsible for sending customers the take-out offers from private carriers, instead of having the carriers send them. Also, under the legislation, Citizens will have to include all potential offers so customers can choose. Currently three companies could have made an offer, but Citizens customers may have seen only one of the offers.

"There were several other pro-consumers issues in there that will be good for people," Flores said of the bill that passed the House and the Senate and now awaits Scott's approval to become law.

But Flores hasn't completely given up. If re-elected later this year, Flores vowed it won't be the last attempt at reforming the take-out process.

"We're going to have to come back and do some more," Flores said.

But Citizens officials warn that current customers could be looking at rate increases regardless because of another big legislative failing. The Legislature did not vote on any legislation to address a spike in water damage claims that are being filed against Citizens and other insurance companies, particularly in Miami-Dade, Broward and Palm Beach. Citizens president and CEO Barry Gilway said the "mind-boggling" increase in South Florida is going to provoke premium rate increases and threaten depopulation gains.

Citizens and other insurance companies led the fight for changes to state laws that allow homeowners who need repairs on their home to sign their rights over to contractors who then fight the insurance companies for payment of claims. Supporters of the legislation said there has been a proliferation of lawsuits over claims that are costing all insurers money, particularly in South Florida. They maintain that many of the claims are fraud.

But opponents have defended the status quo, saying homeowners are essentially enlisting help to get insurers to pay up on rightful claims.

Regardless, Gilway said the demise of efforts to reform how water damage claims are managed is threatening depopulation. He said as private insurers face more lawsuits, they are going to be less likely to take on more take-out policies from Citizens. He told Citizens' board of governors last week that their inability to get the legislature to act on the legislation will have consequences.

"We completely failed," Gilway said.

Contact Jeremy Wallace at or (850) 224-7263. Follow @jeremyswallace on Twitter.