Florida Governor Vetoes Changes to Citizens Depopulation Program

June 4, 2015 by

Florida Gov. Rick Scott has vetoed legislation that would modify Citizens Property Insurance Corp.’s depopulation program enacted to lower the state-created insurer of last resort’s policy count and reduce its exposure in the state.

In his June 2 veto letter addressed to Secretary of State Kenneth W. Detzner, Scott expressed his objections to the legislation, saying the bill “undermines progress in growing the number of property insurance options and reducing assessment risks for Florida Families.”

The stipulations of House Bill 1087, sponsored by the Florida Regulatory Affairs Committee and the Insurance & Banking Subcommittee and introduced by Rep. Michael Bileca (R-Dade County), included:

  • Specifying a consumer representative appointed by Governor to corporation’s board of governors is not prohibited from practicing in certain professions;
  • Authorizing the use of certain policyholder information by private insurers in analyzing risks; prohibiting use of information to directly solicit policyholders;
  • Requiring policyholder, after date certain, to receive certain information related to demonstrations of interest by insurers;
  • Allowing policyholder to elect to limit frequency of solicitations for takeout offers; providing circumstances under which policyholder whose policy was taken out to be considered renewal policyholder.
  • Providing circumstances under which a policyholder whose policy was taken out to be considered a renewal policyholder for certain rate increase purposes.

According to the Florida House of Representatives Final Bill Analysis, as of July 1, 2015, a policyholder may elect not to be solicited for takeout more than once in a six-month period.

Scott wrote that this provision was of primary concern to him.

“This provision is inherently unfair to Citizens’ policyholders in that it limits policyholders’ private market options, which means they miss an opportunity to move to a better property insurance alternative,” he wrote.

The Citizens depopulation effort has proven to be successful, yet controversial, in lowering Citizens’ policy count and ensuring the insurer’s ability to pay claims for policyholders that cannot find insurance in the private market. Just this past March, the company announced that it is the smallest it has been since its creation in 2002, with a policy count of less than 600,000 as of March 13. That number represents a huge drop from its highest policyholder count of 1.5 million, or about 26 percent of the Florida residential market, in November 2012.

The insurer’s approved take-outs as of May 15 of this year totaled 632,286 and the total number of policies removed was 110,529.

“The reality is that significant improvements in profitability and the increasing financial strength of companies has been a major factor in our ability to return to our role as the state’s insurer of last resort,” Citizens President and CEO Barry Gilway told the Citizens Board of Governors back in March.

In his letter, Scott credited the depopulation efforts with returning viable Citizens’ policyholders to the private market and reducing the risk of additional assessments for all Floridians. Scott wrote that the effort has “gone a long way in reducing reliance on Citizens and the potential of assessments after a catastrophic event when Floridians are at their most vulnerable.”

Scott added that creating a process where a policyholder can return to Citizens, even though they are currently insured by a private market insurer, was also of concern to him, “This perpetuates reliance on Citizens, which increases the potential for burdensome assessments on Florida families.”

“As alternatives to Citizens continue to grow, state policy must continue to reduce dependency on Citizens, as it is designed to be an insurer of last resort and not the insurer of first resort… provisions of this bill go against the mission and purpose of Citizens,” he wrote.

Read the entire letter below.

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