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The Battle of Citizens begins in Florida Legislature, p. 2

Sat Mar 16th, 2013 on     Insurance Law,    

Senate Bill 7018 will go a long way toward moving Florida homeowners out of state-backed Citizens Property Insurance Corp. and into the private insurance market, according to the bill’s authors. The overriding goal is to depopulate (the Senate’s term) Citizens.

In our last post, we discussed the revised rating scheme for new policies. The bill would increase rates for new accounts to levels that match the highest rate in the private market but would leave the 10 percent limit, the “glidepath,” in place for existing policyholders.

The revamped Citizens would also not cover high-end properties anymore. The new law would make expensive homes ineligible for state-backed insurance coverage in a step-down scheme that would reduce the highest replacement value of eligible homes by $100,000 every year. In January 2014, then, the insurer would refuse coverage to homes, including condominiums, with replacement values higher than $1 million. By 2019, the threshold would be down to $500,000.

Lawmakers hope that the step-down approach will allow those homeowners facing ineligibility a chance to shop around for private insurance or, in the alternative, to pay down their mortgages. As we have discussed here, mortgage lenders require homeowners to carry adequate property insurance; if the insurance lapses for some reason, the insurer can purchase a policy for the borrower and, of course, pass the cost on to the borrower as well.

Wealthier homeowners are not the only Citizens policyholders in the bill’s crosshairs, though. Florida’s snowbirds — out-of-state residents who own vacation homes here — are also included in the bill. We’ll discuss that plan in our next post.

Source: Insurance Journal, “Florida Senate Bill Would Depopulate Citizens, Raise Rates, Create Clearinghouse,” Michael Adams, March 13, 2013

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