Making progress at Citizens
Citizens Property Insurance is a fiscal time bomb, and as is customary bills seeking to revamp it have been offered this legislative session. But state lawmakers should give new Citizens' CEO Barry Gilway a chance to continue his reforms and not disrupt the progress that is being made to shrink what was intended to be the insurer of last resort but has mushroomed into the state's biggest property insurer. The Legislature should approve the measure Gilway is requesting to help put more Citizens' policies in the private market but not attempt any major changes this year. Clearly, Citizens remains vastly overextended, and all ratepayers would be on the hook to make up any shortages should a disaster strike.But Tallahassee leaders should recognize that Citizens is shrinking policies, thanks to previous efforts by lawmakers and measures by Citizens' executives and board members. Last year, for example, 277,000 policies were removed from the state-backed entity, reducing its overall number to about 1.3 million. That is the most successful "depopulation" effort in the last four years, according to Citizens. In addition, Weston Insurance Co. has won approval to take on more than 30,000 of Citizens' wind-only policies, 6,000 of which are commercial, according to the Insurance Journal. Citizens says this is the first commercial wind-only depopulation in its history. The reduction in exposure last year — about $76 billion total — is significant progress, and lawmakers must be careful not to mandate changes that could derail, or slow, the effort. In Gilway, who has vast experience in the private sector, Citizens finally appears to have a highly capable CEO. Upon taking the job last June, Gilway walked into a major scandal involving employee misconduct, questionable spending and other internal havoc that damaged Citizens' credibility. He understands that taxpayers need to have the utmost confidence in the insurer and has taken steps to clean things up, including establishing new travel and expense policies, tightening the budget and hiring two forensic auditors. Gilway, his executives and the board also are taking steps to create a "Consumer Choice Clearinghouse" that could result in the insurer shedding more policies and exposure. Here is where they will need state lawmakers' help, and lawmakers should provide it. The clearinghouse would allow for the detailed comparison of Citizens' policies with those in the private market — with Citizens acting as a broker. Such a program makes sense. It would enable Citizens to ensure it is providing coverage to only people who are eligible under Florida law — such as those whose properties don't exceed certain replacement values or have been deemed "uninsurable" by private carriers. In addition, a clearinghouse would give property owners options. As painful as acquiring and maintaining property insurance in Florida can be, people who aren't supposed to be insured by Citizens should have to make other arrangements. And Citizens' policyholders should want options. Coverage is usually inferior to the private market, and Citizens policyholders also are subject to a stiffer series of surcharges and assessments than other Florida policyholders in the event the insurer can't pay claims. Gilway says 50 percent or more of Citizens' policies are not being shopped effectively in the private market. That needs to change so Citizens can fulfill the role for which it was created — to provide property insurance to people who can't get it anywhere else. A clearinghouse could help accomplish that. The CEO also estimates that perhaps 200,000 people are in Citizens who should not be — there are probably opportunities in the private market for them, he says. Ideally, Gilway says, Citizens should only have 700,000 or so policyholders. That kind of downsizing can be accomplished as long as Citizens, with help from the Legislature when needed, makes sure rules are enforced, limits coverage of pricey homes and other property, and most importantly, helps policyholders find coverage in the private market.