Florida Citizens’ Policyholders Could See Shift to Out of State Insurers

Homeowners seeking coverage from Citizens Property Insurance could wind up getting policies from unregulated out-of-state insurers.

The Florida Senate on Friday voted 22-16 for a property insurance bill that could result in homeowners seeking coverage from Citizens to be shifted to a private surplus line insurance company. Surplus line companies are not subjected to the same regulations as companies based in the state.

Several senators objected to the legislation, including Republicans who live in areas with heavy concentrations of customers with the state-created Citizens.

“We have insurance regulation in the state of Florida for a good reason,” said Sen. Jeff Clemens, D-Lake Worth. “It’s to make sure consumers in Florida aren’t being taking advantage of.”

The Republican-controlled Legislature has considered similar measures in recent years but they have been defeated.

Lawmakers have taken several steps over the last few years to try to steer people away from the state-created Citizens. Citizens was set up initially to be an insurer of last resort but it grew in size as Florida has been hit by hurricanes and private insurers sought to limit their exposure in the Sunshine State.

Last year legislators approved creating a clearinghouse that requires insurance agents to look at offers from private insurers before allowing someone to purchase a Citizens policy. A customer is ineligible for Citizens if one of the insurers charges premiums that are within 15 percent of Citizens rates.

The Senate bill (SB 1672) would add surplus line insurers to those insurers that could be offered through the clearinghouse starting in January.

Sen. David Simmons, R-Altamonte Springs, defended the bill and said it would give homeowners another choice for coverage. He said homeowners would be told ahead of time that the surplus line insurers are not regulated the same way as other insurers.

Simmons added that homeowners would also be allowed to move back to Citizens after receiving coverage from the surplus line insurer. He also noted some Floridians already insure their homes with these type of insurers.

“We have gone overboard to protect the consumer so the consumer can make an intelligent decision,” Simmons said.

Florida’s former insurance consumer advocate, however, blasted the proposal.

“These surplus lines insurers are a last resort given the lack of regulatory oversight,” said Sean Shaw, founder of Policyholders of Florida and who is running for the Florida Legislature. “These companies would be able to jack up rates on Floridians without state regulation – putting seniors and families at risk. We stopped this from happening before and it needs to be stopped again.”