Along the Coast: Citizens drops hundreds of high-value policies

By Tim Pallesen
Citizens Insurance is notifying owners of homes valued over $1 million that their insurance coverage will be cancelled.
    Coastal communities are hardest hit, according to data released by the state insurer.
    Cancellation notices mailed as the hurricane season began leave south county coastal residents scrambling to find alternative insurance at higher costs.
    The mayors of two of the south county’s most affluent towns, Gulf Stream and Manalapan, say the cancellation of coverage for expensive homes is unfair.
    “It discriminates against the high-end homeowner,” Gulf Stream Mayor Joan Orthwein said.
    Gov. Rick Scott and the Florida Legislature are supporting Citizens’ attempt to reduce its financial exposure of $508 billion. The state insurer with 1.5 million policies has $5.7 billion to pay claims after a hurricane.
    Citizens says the lower $1 million coverage limit will allow them to eliminate 7,500 policies statewide and $17 billion in exposure.
    “It’s unfair to single out one group,” Manalapan Mayor Basil Diamond said.
    “But Citizens is looking for ways to go out of business. The coverage limit is one baby step,” Diamond said. “All this will eventually even out if Tallahassee reaches its goal to fully eliminate Citizens.”
    Citizens chose to slash coverage in affluent oceanfront towns because of public opinion, according to Jeff Grady, the president and CEO of the Florida Association of Insurance Agents.
    “The argument was that Citizens was subsidizing millionaires to insure what was often their second home,” Grady said. “That was the emotion behind this.”
    The purge of expensive homes began last year when Citizens set $2 million as the maximum coverage, sending the first wave of cancellation notices.
    Delray Beach City Commissioner Tom Carney was among those who got cancelled. “Anything east of the Intracoastal Waterway lost it,” Carney said.
    Coastal homes are hardest hit again by this year’s $1 million coverage limit.
    Palm Beach County has the second highest number of cancellations with 1,542 policies valued at $3.7 billion, which equals 22 percent of the state dollar amount.
    South county coastal communities with ZIP codes 33431, 33432, 33435, 33462, 33483 and 33487 received 613 cancellations, Citizens said.
    The mayor of Palm Beach, which got 299 cancellations, is organizing Palm Beach County coastal mayors to protest the coverage limit.
    “The legislation making homes valued at more than $1 million or more not eligible for coverage by Citizens is arbitrary, capricious and discriminatory,” Mayor Gail Coniglio wrote Gov. Scott after Palm Beach residents began getting their notices.
    Diamond said Manalapan residents may not know about the cancellations yet. “It’s important for Tallahassee to be aware if there’s a lot of pushback on this,” he said.
    The state Office of Insurance Regulation approved Citizens’ request for the $1 million maximum coverage on Jan. 13. Citizens stopped writing new policies for the more expensive homes and began sending out cancellation notices for existing policies in May.
    Grady and local insurance agencies say residents who have been cancelled by Citizens now must find alternative carriers such as Lloyd’s of London that aren’t regulated by the state.
    “It’s the wild, wild west as far as rates and what is covered,” Grady said.
    “We can obtain coverage for everybody for a price,” Gracey-Backer Insurance co-owner Barbara Backer said. “But all affected homeowners will see hefty premium increases.”
    Backer estimated increases will range from 100 to 200 percent, depending on construction, location and wind protection. One of her Delray Beach clients now must pay a $17,718 premium to an alternative insurance carrier after paying only a $6,417 to Citizens, she said.
    Another south county agent, Plastridge Insurance, predicts alternative coverage will skyrocket to be three or four times the Citizens cost. “This has really hit those homeowners hard,” Plastridge co-owner Brendan Lynch said.
    Alternative insurance carriers also are raising deductibles, Lynch and Backer said.
    Backer predicted some owners of expensive homes will be forced to sell because they can’t afford the added insurance cost.
    “At some point, it becomes unaffordable to buy these high-priced homes,” Backer said. “I suspect this insurance cost will affect the real estate market.”         

Citizens says it’s dropping more than 600 Multiperil and Wind Only policies in the coastal area

ZIP Code    Policies Affected    Total Policies
33431         42                                     820
33432        217                                    973
33435        49                                   1,650
33462        50                                      775
33483        159                                  1,428
33487        96                                       613


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Comment by Brian on August 30, 2012 at 6:21pm

And coastal insurance problems come as a surprise to who?

Many years ago I insured one of my homes with Citizens.  They quoted me an annual premium. I wrote them a check in full. Less than a month later they said they changed the premium and that I owed more money, about 30% more. I told them to cancel the policy and refund my premium in full. The refunded my pre-paid premium pro-rata -- but here's the kicker -- the pro-rate amount was calculated using the based off the  increased premium, not the premium I agreed to and paid in full.

Called Tallahassee and complained, but they told me that Citizens had the legal right to play the game they did. Sadly this would be criminal in any other industry, but Florida let Citizens get away with it.

Just try to get insurance for your boat with three or more engines. Nearly impossible! Apparently the underwriters' Masters degrees only taught them single digit math. They learned that three is more than two, even if the combined horsepower of two engines exceeds the combined horsepower of three engines.  

Insurance in Florida is a downright shame and what's even more shameful is our governor not taking any measures to fix it. Keep campaigning for tourism in the panhandle Rick -- and keep ignoring those of us that live here and have built businesses here.

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