Citizens says it's ready for the task

Its chairman says the insurer can cut rates and still expand its role in the market.

By Tom Zucco
Published January 23, 2007

They will need to add hundreds of employees at a sizable cost and convince them they will have jobs for more than a year. And the companies they will compete against insist nothing good can come out of an expansion.

But the chairman of Citizens Property Insurance thinks his people can manage the growing pains the agency will feel this year as a result of legislation passed Monday.

The state-backed property insurer of last resort is being told to do something asked of no other insurer in the state - juggle a rate decrease as it expands its role in the market.

But Citizens says it can do that.

"What I see coming out of this is really good," Citizens board chairman Bruce Douglas said Monday. "It gives us an opportunity to help stabilize the market and reduce rates, at least temporarily."

And while House Speaker Marco Rubio referred this week to Citizens as "the worst insurance company" because of its poor customer-service record in the past, Douglas promised to throw everything he had at the problem.

"We'll educate our 8,500 agents," Douglas said, "and we're sending letters out to the agents clearly stating what it means to them."

Citizens was created as a last-ditch insurer for those who couldn't find property coverage in the open market. The ideal scenario: Private insurers would be enticed by bonuses to take policies so Citizens would shrink as small as possible. Now, pending approval of a business plan by regulators, the Legislature is institutionalizing Citizens with a broader mission.

Still uncertain is how many employees Citizens will have to add to its 750-worker base and the cost.

How the new law that allows Citizens to compete with the private market and take in new lines of coverage will affect the state market as a whole depends on which side of the fence you're on.

For the most part, Citizens officials and consumer groups like it; the private market doesn't.

"When you have the campaign rhetoric we had of lowered premiums, it makes it difficult to reach the end result," said Jeff Brewer, a spokesman for the Property Casualty Insurers Association of America.

"This (legislation) does not solve the problem of the Florida homeowners market. We didn't have any storms in 2006, and that gave insurers the opportunity to start to recover from the 2004-2005 seasons. It takes a number of years to rebuild our capital."

It has been a tough pill for most legislators as well. Broadening Citizens' base is something they've opposed adamantly for years. The state wants private companies, not Citizens, to be the big player in Florida.

But lawmakers are caught between the philosophy that Citizens should be shrinking, and the reality that it's now the largest property insurer in the state and is growing at a rate of about 50,000 policies a month.

To some, allowing Citizens to compete is simply an extension of the free market.

"I believe (the private market) will expand to the extent it chooses to," said Sen. Jeff Atwater, R-North Palm Beach. "What we're doing is placing the consumer in the position to challenge the private market carrier. To say, 'Take me back, but take me fairly.' "

Others take the notion further.

"I think it's a positive step because up until now, the Legislature has been giving away the store to the industry," said Bob Hunter, insurance expert for the Consumer Federation of America.

Tom Zucco can be reached at zucco@sptimes.com or (727) 893-8247.