George Gibbs Center for Economic Prosperity

The Palm Beach Pos⁠t⁠: A⁠t⁠ leas⁠t⁠ 14,000 cus⁠t⁠omers go⁠t⁠ le⁠t⁠⁠t⁠ers w⁠i⁠⁠t⁠h bogus C⁠i⁠⁠t⁠⁠i⁠zens ra⁠t⁠es

By: The James Madison Institute / 2014

By Charles ElmorePalm Beach Post Staff Writer
About 14,000 letters from a Florida insurer seeking customers from Citizens Property Insurance Corp. overstated the state-run insurer’s renewal premiums, state offiicials estimated after The Palm Beach Post reported errors that one homeowner called “disturbing.”Citizens president Barry Gilway said he found the coverage “interesting” after addressing an insurance summit in Orlando: “Frankly, it brings to light an issue for us.”Citizens reviews and approves many letters sent to its customers by private insurers but not necessarily any particular rate information that may be included in some correspondence, Gilway said.“We only have so much control” over what private insurers do, Gilway said.State regulators said they are requiring First Community Insurance Co. to revise and resend letters and give customers 60 days to respond to the offer. No fine or penalty has been mentioned. A spokeswoman for the Florida Office of Insurance Regulation said Thursday she had no information on whether state officials see any need to review or tighten rules to make sure private insurers use accurate, agreed-upon price information.Trust that the state is getting it right matters as a new clearinghouse is set to begin operating early this year. With traditional transfer offers, customers have the option to remain with Citizens. The clearinghouse is designed to make customers ineligible for Citizens if private insurers offer comparably priced coverage.The Post reported this week that some transfer letters contained erroneously high premiums for Citizens renewal policies, making the private insurer’s rates look better by comparison.State regulators estimated about 18,000 letters went out to Citizens customers from First Community and 14,000 of those had inaccurate information, according to Citizens spokesman Michael Peltier.One Palm Beach County customer said a letter claimed his Citizens renewal policy would be more than $3,000, double his current premium, while the private insurer was offering coverage for about $2,300.First Community, a unit of Bankers Insurance Group in St. Petersburg, apologized “for any confusion.” The company was approved to send out more than 50,000 offers for coverage to take effect Feb. 4, though actual mailings can be smaller.How South Florida homeowners view things can be very different from the perspective of industry executives and politicians who filed past people dressed like Buzz Lightyear and Tinker Bell at the insurance summit in Orlando Thursday.Florida Insurance Commissioner Kevin McCarty said the market is beginning to turn a corner, with half a dozen of the top 30 insurers cutting rates because a key cost, reinsurance, is declining. But for many attendees, the focus has remained less on whether people are paying too much for insurance and more on the idea that some still are not paying enough.One panelist spoke of “predatory pricing” by Citizens, creating subsidies that drive out private insurers. The phrase came from Steve Pociask, a president of The American Consumer Institute, a Washington, D.C.-based nonprofit that advocates for smaller government on its website and acknowledges its view is different from many groups that say they advocate for consumers.“If you want to look at market failure, it’s really a government failure,” Pociask said.Gilway mentioned the phrase himself.“It is predatory pricing,” he told the conference. “The concern is we’re writing at grossly inadequate rates.”On other occasions, Gilway has acknowledged Citizens rates are nearing what the company considers to be adequate for many customers. That’s reflected in the fact Citizens requested an overall rate increase of about 6 percent for 2014, less than the 10 percent it could raise rates under state law. Wind-only customers near the coast tend to have rates the company says are less than adequate.The Florida Hurricane Catastrophe Fund is considering buying $1.5 billion of a form of private reinsurance to back up the state fund that helps insurers pay claims after bad storms, chief operating offer Jack Nicholson said Thursday. That could raise consumer rates — less than 1 percent, he estimated — but help Florida insurance customers in the long run if it reduces the risk of assessments to bail out the state fund after a catastrophe, Nicholson said. The plan could come before members of the Florida Cabinet in coming weeks, he said.The idea is endorsed by the Association of Bermuda Insurers and Reinsurers, which sponsored a lunch at the summit Thursday.The James Madison Institute of Tallahassee recommended 10 solutions for fixing Florida’s property insurance marketplace — including letting “surplus lines” insurers take Citizens customers. Such lightly-regulated insurers could offer more options for consumers. On the other hand, they would be allowed to raise rates as much as they like and claims would not be covered by a state fund if they failed to pay.Gilway said such “non-admitted” carriers could provide more insurance capacity to the state.“I think there’s a real opportunity there,” Gilway said, “with the right controls.”Gov. Rick Scott is scheduled to address the 7th Annual Florida Chamber of Commerce Insurance Summit on Friday.