On November 30, 2012 Governor Rick Scott addressed Florida’s 6th Annual Insurance Summit in Lake Buena Vista. During his remarks he targets Citizens Property Insurance as a threat to Florida’s economic future. Below are his remarks addressing Citizens Property Insurance:
In order to decrease costs for Florida homeowners we must increase competition in the marketplace by addressing major concerns with Citizens Property Insurance.
Citizens was created to be the insurer of last resort. Today Citizens is now the largest insurer in the state.
Citizens poses three major concerns to our insurance market for Florida families who dream of owning a home:
First, the existence of Citizens Insurance increases the chance that Floridians will be hit with hurricane taxes;
Second, Citizens is grossly underfunded; and
Third, Citizens inhibits new companies from coming to Florida resulting in less competition.
First, all of Citizens policyholders are subject to a special hurricane tax. Florida families could be hit with a hurricane tax at a time when they can least afford it, right after a devastating storm. And 79% of Citizens’ policyholders have no idea that they are subject to a hurricane tax.
Think about this. The average Citizens insurance policyholder pays a premium of approximately $2,300. If a storm hits that depletes Citizens’ surplus, either one big storm or several smaller storms, Florida’s families will be assessed hurricane taxes to pay for Citizens losses. This means that the average family with a Citizens policy faces a hurricane tax of over $1000.
A family may be forced to pay this tax even though their home wasn’t hit by a storm. A family in Tampa could be insured with Citizens and face a hurricane tax to pay for losses to Citizens’ policyholders in Miami.
If Citizens can’t pay its claims, the families with Citizens policies are first up for hurricane taxes. Then, once Citizens taxes its own policyholders, they will then tax every Floridian with an insurance policy in order to get additional funds.
So, Citizens Property Insurance poses a threat to each and every Floridian with an insurance policy. If Citizens can’t pay its claims, we are all on the hook for its losses. And Floridians can be taxed multiple times. Your homeowner’s policy could be taxed; your auto policy could be taxed. Even the policy on your family pet could be taxed.
That means that the average Florida family who owns a home and two cars could be taxed three times to pay for a Citizens’ deficit.
Most families have no idea that they are liable for the potential losses of the state’s largest property insurer.
My second major concern is that Citizens is woefully underfunded. Today, Citizens has a little over $6 billion in surplus. But one storm the size of Hurricane Andrew could result in nearly $14 billion in losses to Citizens. That’s an unfunded liability of nearly $8 billion dollars. The only way to pay for those losses is by taxing Florida families.
Finally, Citizens hurts Florida families by crowding out competition in the insurance marketplace, which limits the ability to reduce costs for homeowners.
I’ve traveled the state and spoken to numerous leaders of insurance companies to ask them: “What’s preventing you from expanding your business in Florida?” Nearly every time I’ve been told that the domination of Citizens Insurance prevents new companies from coming to Florida while also preventing existing companies from expanding in Florida.
How can any private insurance company compete with a government-sponsored entity that doesn’t pay taxes and doesn’t need to charge fair market prices? It can’t.
Shrinking Citizens is the first step toward increasing competition in the marketplace and driving down prices for homeowners.
Shrinking Citizens will also protect Florida families from hurricane taxes.
And, shrinking Citizens will attract new capital to Florida and help to permanently reduce the cost of property insurance.
To make the dream of homeownership a reality for more Floridians, we must reduce the size of Citizens, which has grown from an insurer of last resort to an insurance giant in just a matter of years.
We began making some progress toward this goal by giving over 400,000 Citizens policyholders the opportunity to return to the private insurance market this year.
Of course, we must also ensure Citizens is not wasteful. I recently directed the Chief Inspector General to investigate travel expenses and firings at Citizens. This report will tell us what additional steps must be taken to enforce oversight and compliance within Citizens. A taxpayer organized entity must be held to the highest standards of integrity and good stewardship of the public trust.