Citizens Property Insurance Corp. has seen its policy counts skyrocket over the past few years as rising costs make it difficult for private insurers to stay in the Florida market.
Lawmakers have taken steps to stabilize the property insurance market, but Citizens is limited in what it can do to get policyholders to shift back to the private market — a process known as “depopulation.”
At the Florida Chamber of Commerce’s Insurance Summit, Citizens Chief of Communications Christine Ashburn told Personal Insurance Federation of Florida President Michael Carlson that the state-backed insurer is pushing for a handful of changes in the 2022 Legislative Session that could accelerate the depopulation effort.
Citizens runs a policy clearinghouse for private insurers to make offers to pick up policies, but current law allows homeowners to refuse the switch for any reason.
Ashburn said the insurer is crafting legislation that would make policyholders ineligible for coverage through Citizens if a private insurer offers them a policy that costs less than 20% more than the rate offered by Citizens.
“We can’t force anyone to take an offer through a certain carrier, but we can certainly, under statute, tell them that they’re no longer eligible to remain with Citizens, which is how it used to work many years ago,” she said.
The end result for those Citizens customers would be higher rates, though Ashburn said many insurers’ policies have artificially low premiums — in Pinellas, for example, she said Citizens customers pay 55% less than the market rate.
And Ashburn said she is confident that the new rule would have the desired effect of bringing back private insurers.
“I will tell you that in talking to at least one set of investors the question I asked was, ‘if we can get this done, do you think you can build a rate that is competitive in many places within 20% of our rate?’ And the answer is yes,” she said.
She said the proposal has some strong allies in the Senate. The situation in the House is less clear, though it’s being received well in one-on-one meetings with lawmakers.
“Let’s face it, it’s an election year,” she said. “We just did a big property bill, and it’s really hard once you’ve done a property bill to come back and say, ‘Hey, thank you for all you’ve done, but could we do a little more?’”
Lawmakers passed a property insurance package last Session that in part aimed to slow the migration of homeowners policies to the state-backed insurer.
The bundle included raising the cap on how much Citizens may raise premiums, bumping it from 10% to 15% a year.
The bill also sought to curb property insurance litigation, which insurers point to as the primary cause of rate increases in recent years.
A key provision in the bill would have blocked roofing contractors from door-to-door soliciting homeowners, but the courts blocked it from going into effect.
In issuing an injunction, U.S. District Judge Mark Walker said that while the Legislature was within its rights to regulate contractors, the provision infringed upon contractors’ free speech rights.
The case is still moving through the courts, but Carlson told Florida Politics he expects that ruling to stand.
Still, he believes it’s possible future legislation could place some restrictions on contractor solicitation, possibly by blocking them from making explicit requests for consumers to file a lawsuit or insurance claim.
Attorney fees, however, remain the biggest threat to the insurance industry.
Under state law, attorney fees are paid by the prevailing party in a lawsuit. But insurers are also on the hook for plaintiffs’ attorney fees if they settle a claim before trial. If that rule were reformed or eliminated, Carlson said many of the troubles facing the property insurance industry “could be solved within a year.”
“A lot of this practice is a settlement practice,” he said during the panel. “They’re filing the suit simply to get to a point of settlement, to extract a fee. So, it’s a really smart litigation-for-profit scheme. And the only way they can do that is because of the fee-shifting law.
He continued, “Until we can really properly and perhaps more aggressively address that fee-shifting law, we’re always going to have a pro-plaintiffs litigation environment. There’s nothing that can be done about that through (the Office of Insurance Regulation) or through any agency of government or through Citizens or through the companies individually. It’s a statutory change that’s needed.”