Citizens bill only justifies insurers' high rate requests

Published December 10, 2006

On March 1, Citizens Property Insurance Corp., the state-run insurer that provides insurance to home and business owners in high-risk areas and others who cannot find coverage in the open, private insurance market, is mandated by Senate Bill 1980 to begin charging policyholders a premium that includes enough of an increase to cover Citizens' cost of purchasing reinsurance. However, Citizens is not required to buy the reinsurance, and has no plans to do so. It is simply required to pass along the fictitious costs to Floridians as if they were purchasing reinsurance. What does this mean for home and business owners? If the rates take effect, it means an average rate increase of nearly 56 percent for most of Citizens' residential policies, and an average 610 percent increase for its commercial policies.

How did this happen? In the closing hours of the 2006 legislative session, insurance industry lobbyists managed to sneak language into Senate Bill 1980 requiring Citizens to raise their rates as if they were purchasing expensive reinsurance. Why would private insurance companies care how much state-operated Citizens raises its rates? Because insurance companies have been seeking state approval of record rate hikes over the past couple years, and in many cases their requests have been lowered or denied.

But if Citizens raises their rates an astronomical amount, then the high rate requests that private companies submit don't look quite so bad. It's a numbers game, and it is being played with Floridians' hard-earned money.

Obviously this situation is ludicrous, and something must be done. Insurance is a way of life in our state. It is a necessary burden that all home and business owners must bear, especially considering the constant threat of hurricanes. So what is the answer to this crisis? There is no single solution. A special session of the Legislature has been called in January to address the insurance crisis. At that time, the two provisions in Senate Bill 1980 requiring home and business owners to bear the cost of reinsurance that Citizens is not even going to purchase must be repealed. This is, by no means, the only solution to providing for a healthy and affordable insurance market in our state, but it is a much-needed beginning.