Well, sometimes ‘opt out’ means ‘maybe later’ p2

We are still talking about some of the problems that have come up during Citizens Property Insurance Corp.’s depopulation program. Before we continue, though, we want to take a brief detour.

A friend of ours told us a timely story about a homeowners association meeting she attended. The association was in the market for property insurance, and one board member suggested they get multiple bids. There are a lot of older buildings like theirs in the neighborhood, he said, and they all need insurance. That should create competition among the insurers, which should result in lower premiums.

Our friend tried to explain that insurance companies would rather not cover older buildings, because older buildings tend to have more claims and more expensive claims. Insurance companies are all about avoiding the risky customers. They would rather go with the customers who will pay premiums year after year but never file a claim.

The comment fell on deaf ears. Our friend left the meeting convinced that, had the board been following the depopulation (or “rightsizing”) of Citizens, the comment never would have been made. After all, Citizens ended up with 1.5 million policyholders because private insurers didn’t want the risk.

First, the state had to find ways to encourage companies to come back to Florida. Once that was accomplished, and the state had its “take-out” companies — the companies that would take on Citizens’ low-risk policies — depopulation could begin.

The process seemed simple enough. In our last post, we explained that the problem seemed to be with the policyholders that had a choice between Citizens and a private insurer. The premiums were close enough that the policyholder did not have to leave Citizens, but the whole point of the program was to move people from Citizens to the private market. 

Right now, it works like this: These policyholders receive an “encouragement letter” from Citizens. The letter explains that the private insurance company — the company that has taken that policy from the clearinghouse list of on-the-cusp policies — will be in touch with information about coverage that could replace the policyholder’s existing Citizens coverage. The letter also touts the benefits of switching to the private market and explains what will happen next.

Sort of.

We’ll continue this in our next post.

Source: Citizens Property Insurance Corp., Depopulation, sample letters and other materials at https://www.citizensfla.com/about/depopinfo.cfm, accessed Jan. 13, 2016

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