Some lawmakers want Citizens rate hike [The News Herald, Panama City, Fla.]

June 08--TALLAHASSEE -- Raising rates on new Citizens Property Insurance policyholders is not a question of fairness; it's a question of correcting a market error and getting the state government out of the insurance business, according to local legislators.

Sen. Don Gaetz, R-Niceville, was one of 25 legislators who recently signed a letter to the interim president of Citizens, Tom Grady, endorsing a recommendation of the Citizens board to increase property insurance rates for new Citizens customers.

Rep. Jimmy Patronis, R-Panama City, said he was not aware of the letter but supported a rate hike to increase Citizens' solvency.

The insurance fund does not collect enough revenue to adequately cover the risk it has assumed, and one method of making the fund financially sound is raising the rates. Possible increases of up to 30 percent have been reported.

"We want lower homeowner's insurance rates in Florida. There are so many things we wish were less expensive including health care and gasoline. But the recent debate about Citizens Insurance rates is not about the cost of the insurance -- it's about who is paying for it," the letter states.

To sustain current rates, in the event of a major storm an assessment would be levied on all Florida insurance policyholders, not only Citizens customers, Gaetz said.

"The actual cost of insurance is shifted to others, who become an involuntary subsidizer," he said.

The current system would leave the entire state with a huge bill in the event of a large hurricane, Patronis said.

Citizens currently has about 1.5 million policies, including about 13,000 in Bay County. According to a representative for Citizens, Bay County residents would be looking at in increase of about 20 percent if the current 10 percent cap on rate increases was removed.

The company started as an insurer of last resort after private companies began to refuse to issue policies on old and coastal structures largely because of the threat of hurricanes. Since then, it has become the largest insurer in Florida.

"It's irresponsible to have an insurance company that can't pay its bills," Patronis said.

Gaetz said Citizens has "metastasized far beyond its initial scope," but also said he'd "never met anyone who wants to be in Citizens." Gaetz himself became a customer of Citizens when the insurance policy on a rental home he owns was canceled by State Farm and he was forced to find alternative insurance.

Too often, Patronis said, people who are canceled by their insurance provider blindly enroll in Citizens without shopping around first. This creates a situation unattractive to competition and unfavorable to private insurers, placing an increasing burden on the state system.

"We are in a position that the state has to get out of the insurance business," Patronis said. "... We want to have a state that is fiscally sound and fiscally responsible."

Gaetz acknowledged it seems unfair to put a burdensome rate increase on customers who are with Citizens only because all private carriers refused to insure their home. But, it also is unfair, he said, to ask others to subsidize insurance for risky structures they did not choose to build or purchase.

Since Citizens was formed, more insurance companies have entered the Florida market, and every year the state skirts major hurricane damage, structures become more likely to be eligible for private insurance. However, the existence of Citizens artificially inflates the market for hard-to-insure homes, Gaetz said, making it almost impossible to tell if an insurer-of-last resort even is still necessary.

"We don't know what the real market is," he said.

Gaetz was joined in his support for a rate hike by Sens. Alan Hays and Garret Richter, and Reps. Jim Boyd, Ben Albritton, Dennis Baxley, Jason Brodeur, Daniel Davis, Brad Drake, Eric Eisnaugle, Matt Gaetz, Bill Hager, Mike Horner, Charles McBurney, Larry Metz, Bryan Nelson, Kathleen Passidomo, Scott Plakon, Elizabeth Porter, Stephen Precourt, Lake Ray, Kelly Stargel, John Tobia, Mike Weinstein and Ritch Workman.

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(c)2012 The News Herald (Panama City, Fla.)

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