Financial professionals are trying to figure out exactly what types of advice consumers are most likely to seek.
Jan. 17--A fresh round of proposals to reform last-resort insurer Citizens include raising its rate cap from 10 percent to 13 percent, though the company's president acknowledged Wednesday only about half of the company's 1.3 million customers have realistic choices in the private market.
By president Barry Gilway's count, about 641,000 customers are good candidates to move to private carriers in the foreseeable future. But there is little or no private-sector interest in insuring many customers in coastal areas, older homes and mobile homes, and in some places that has been true for many years, he said. That's why he sees a reasonable goal as reducing the state-run insurer to about 673,000 customers.
"That's very roughly what we should be shooting for," Gilway told the Florida Senate banking and insurance committee.
Gilway said he supports a "moderate" approach on rates that takes into account the economic impact in South Florida and other places. Among other steps, he advocates a clearinghouse to make sure consumers are better aware of what private carriers may be available before they get to Citizens.
But a drumbeat of calls to hike rates and slash coverage at Citizens continues. Rep. Bryan Nelson, R-Apopka, has discussed raising the cap on Citizens rates now set at 10 percent by 3 percentage points.
Industry groups warn of potential assessments after, say, a 1-in-100 year storm and have supported moves they say could attract more private capital to the market, such as shrinking the state's Cat Fund. That would create more business for private reinsurers but would likely raise insurance rates across the board.
Some environmental groups endorse higher rates to discourage building in coastal areas. Florida Wildlife Federation President Manley Fuller called for "ending unnecessary state subsidies for high-risk coastal development."
But the state's chief financial officer, Jeff Atwater, told state senators Wednesday the typical Citizens home isn't a beachfront mansion but 1,700 or 1,800 square feet, and insurance costs for many of them have already climbed from 5 percent of household income to more than 10 percent.
"We're really dealing with something very fragile -- the well-being of our fellow Floridians and a very modest economic recovery," Atwater said.
Rep. Mike Fasano, R-New Port Richey, said most Citizens customers have already seen rates climb much higher than 13 percent through backdoor means such as removing credits for storm-resistant features or increasing the estimated cost to replace a home.
"To increase the cap is wrong," Fasano said.
Citizens is already getting smaller through existing programs to move customers to private carriers.The Office of Insurance Regulation said it approved the removal of 451,463 policies from Citizens to private carriers in 2012. Customers have a choice to stay with Citizens, so about 60 percent, or 277,002 policyholders, actually left, insurance commissioner Kevin McCarty said.
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