Ex-Citizen Customers to come back

TALLAHASSEE, Fla. -- More than 100,000 former customers of Citizens Property Insurance Corp. whose policies were taken over by two start-up home insurers will be allowed to return to the state-backed company rather than pay dramatically higher premiums, under an order issued Wednesday by Florida Insurance Commissioner Kevin McCarty.

McCarty's order allows homeowners to go back to Citizens if their Citizens policies were taken over by Florida Peninsula Insurance Co. of Boca Raton and Homewise Insurance of Tampa, said Bob Lotane, a spokesman for the state Office of Insurance Regulation. The order targets companies, such as Florida Peninsula and Homewise, that take policies from Citizens and charge higher rates that have not been approved by state regulators.

State law allows insurance companies to collect higher rates before getting approval from state insurance regulators. Should the increase be rejected, companies must refund the difference.

Citizens' takeout program, which gives incentives to private companies to take over policies, is well-intended, McCarty said Wednesday in a statement.

"However, because of unintended consequences these people have been hit with a financial nightmare," he said. "They were already being charged the highest insurance rates where they live only to see their premiums skyrocket even higher. Clearly this is not what the law intended, but, fortunately, the law does allow the relief I am ordering."

The insurance commissioner's order could apply to 108,000 people -- roughly 79,000 with Florida Peninsula and 29,000 with Homewise, Lotane said. The order is effective immediately and will last as long as the companies are charging rates that aren't approved by the state.

Both private insurers targeted customers in Citizens' high-risk area, generally east of Interstate 95 in most of South Florida and east of U.S. 1 in northern Palm Beach County. Many homeowners' insurance premiums more than doubled after the two insurers took over their policies via Citizens' takeout program.

Citizens, which is supposed to be Florida's insurer of last resort, has mushroomed into the state's largest property insurance company. The company insures more than 1.2 million people.

Florida Peninsula is examining McCarty's order, company president Roger Desjadon said in a statement. The company is in talks with state insurance officials over a proposed rate increase that would raise rates as much as 84.9 percent in Broward County and 100.7 percent in Palm Beach County.

State insurance regulators informed Florida Peninsula in May that it intended to reject the company's rate request, Lotane said. Once such a notice is issued, insurers have three options: Request an administrative hearing, appeal to the state's arbitration panel or try to work out differences with state regulators.

Officials from Homewise could not be reached for comment Wednesday. The company has a rate request pending with regulators that could raise premiums as much as 78.9 percent in Broward and 79.6 percent in Palm Beach County.

McCarty's order could mean fewer private companies would be willing to take over Citizens policies, and increases the chance that other insurance policyholders will have to pay extra charges to cover Citizens' deficits, said William Stander, regional manager for the Property Casualty Insurers Association of America.

"I think it's absolutely the wrong message for the market," Stander said. "The market's going to look at this and say, 'The state does not want private insurance companies doing business in Florida. The state wants to write the insurance by themselves, and maybe we should just let them.' And I don't think that's good for the consumer."

But the move is certain to be popular with thousands of South Florida homeowners who have struggled with higher premiums charged by the two companies.

Keith Jackson, a cabinetmaker in Boca Raton whose Citizens policy was taken over by Homewise, said he had to negotiate with company officials and lowered his coverage to bring his $6,000 premium down to $2,300. Unless his premium was lowered, he wouldn't have been able to afford to pay it, he said.

"You have no idea what kind of stress this put on my life," said Jackson, 35, who has two young sons.

His Homewise policy renewed last week, but he said he'd return to Citizens as soon as he's able.

Copyright © 2006 South Florida Sun-Sentinel, Kathy Bushouse. Distributed by McClatchy-Tribune Business News.

Posted by Donald Urschalitz P.A. at October 24, 2006 03:30 PM