Property Insurers: The rest of the story

If you are Currently Insured by Citizens Property insurance Company in Florida, then it is likely that no other Company would provide Insurance when you originally bought the policy.  Up until very recently, the number of companies writing property insurance in Florida was relatively small.  Today, there is  clearinghouse created by Statute to assist in procuring insurance.   It seems there are new Insurers popping up every day.  The following link from Citizens website provides the name and contact information for all take-out companies:  The list is fairly long and growing.

You may be asking why Citizens is trying to shift your policy to a Private Carrier?  Citizens Property Insurance Corporation was originally created when Florida was facing an insurance crisis.  Fewer and fewer companies were selling property insurance to the point that the Legislature had to step in to create an Insurer of last resort.  Citizens quickly became the largest Insurer in the State of Florida and held that unwanted title for several years.  However, Citizens was never intended to grow as large as it was and certainly was not intended to  be a competitor in the market.  In fact, the Statute from which Citizens was born, included language requiring it to depopulate or shed policies to private carriers as soon as possible.  In my opinion, the scales have tipped in favor of the Insurance companies with recent laws, Florida is now crawling with Insurers eager to take on your policy.  As such, Citizens is working with these new companies to assume your policies at an ever increasing pace.

Very likely, if you have not received a letter from citizens offering coverage with a new company, then you probably will in the near future.   The letter usually looks similar to this:  As you will note from the letter of “encouragement” it lists several reasons why you should consider the switch.  One of the reasons scares many people and is a deciding factor in accepting the change.  The threat of being subjected to a surcharge of a large percentage of your premium in the event of a catastrophic event is enough for many people to agree to the switch.

Now, this is the part that no one is talking about. What happens when Florida is hit by a major storm or series of storms like the 2004-2005 Hurricane Seasons?  Will these “take-out” companies be able to bear the financial exposure to a major catastrophic event?  If one or many of these small carriers are not able to pay all of the losses sustained, what will happen to those insureds that elected to leave Citizens.  The answer is  the Florida Insurance Guaranty Association (FIGA).  This is not an insurance company but rather a “fund” created to pay covered losses if the insurer is unable to pay benefits and are insured by a Bankrupt Company?  This is not an easy question to answer but as consumers you should be aware of  this potential and some of the factors to consider when making the change.

First, There are caps on the amount that can be paid by FIGA for those covered losses.  That amount may be less than the amount for which you purchased Insurance. Further, in the event that a coverage dispute arises, your remedies are limited significantly in comparison to that of the actual Insurance company.  Now, lets talk about surcharges.  FIGA is funded primarily by fees paid by “admitted” Insurers in Florida.  However, in the event of a catastrophic event which bankrupts several insurance companies all at once, Everyone with Insurance in Florida (not just homeowners) may be paying additional charges on top of their policy premiums to fund FIGA and its ability to pay for the covered losses of the defunct company.

By no means am I trying to sway any decisions regarding their coverage or Insurer, but there seems to be little discussion about the other factors (as unlikely or likely as they may be) when making a choice.  I encourage all Consumers to contact their agent for specific details on coverages, their “take-out” offer and for further information about Citizens as well as FIGA.   Finally, this commentary and explanation is not intended to be relied upon as legal advice.  Along with my explanation, I have expressed my opinions on some matters.