Private insurance companies will take as many as 400,000 policyholders off the books of Citizens Property Insurance Corp. by the end of 2013, if all goes as the insurance company hopes. The Florida Office of Insurance Regulation approved the plan recently as part of the state's ongoing effort to "depopulate" Citizens by moving homeowners insurance policies from the state-backed carrier to the private market.
Citizens' current 1.2 million policyholders make it the largest insurer in the state. As we have often discussed, regulators and lawmakers believe the concentration of business in what is supposed to be the "insurer of last resort" puts every household in the state at risk. If Citizens cannot meet its claim obligations, every policyholder in the state will be assessed, even if they are not insured by Citizens.
Citizens has not disclosed its selection criteria, but the company made it clear that policyholders will still have a choice. According to a spokesperson, the insurance company will send notices to the affected policyholders no less than 30 days before their renewal date. The notices will include instructions on how to maintain Citizens coverage.
In all, 10 companies will take on the policyholders. The bulk of the policies -- about 100,000 -- will go to United Property and Casualty. Another 50,000 will go to Heritage Property Insurance and Casualty. Heritage may be familiar to Floridians from its dealings with Citizens earlier this year. In an unusual arrangement, Citizens paid $52 million to Heritage to take on about 60,000 policies.
This is not the first time Citizens has offloaded policies to private companies, but those efforts had mixed results. In several cases, the private insurers involved took on the policyholders and soon after became insolvent. While it has been three years since the last time that happened, policyholders may be wary this time around.
Source: Insurance Journal, "Florida’s Citizens Signs with 10 Insurers to Take Nearly 400,000 Policies," Gary Fineout, Sep. 3, 2013