Set Up To Fail

"Citizens Property Insurance, Florida's insurer of last resort."

How many times have you read that appellation attached to the name of the state-owned insurance company? In media accounts about Citizens, it's as common as mold. If I didn't know better, I'd think that was part of the company name. As in, "Citizens Property Insurance Of Last Resort, Inc."

Might as well add a logo: You deserve the worst because no one wants you.

Few news reporters (or insurance customers, for that matter) know the reality behind that too-easy characterization of Citizens. Yesterday, however, Melanie Payne of the News-Press in Southwest Florida gave rich and informative context to the story of the rate increase request expected from Citizens. Along the way, she tossed off a great line.

The line:

: "...many of Citizens 882,000 customers wonder why they are paying boutique prices while being treated like discount shoppers."

The context:

Citizens Property Insurance Corp., the state-run insurer of last resort, has applied for an increase that would raise rates for inland Lee County homeowners with Citizens wind insurance an average of 59.9 percent. The rates for some Florida customers will almost double.

Here's the zinger (emphasis added):

According to Citizens spokesman Justin Glover, the agency had no choice but to respond with rate increase requests once private insurers began to file theirs. By law, Citizens is required to charge the highest rates in any county, Glover said. So far, a dozen private insurance carriers have filed for rate increases with the Office of Insurance Regulation.
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[T]he Citizens increase requests were a result of an order by the state to revise upward some of their prices, which were found to be below the rates of private insurers in certain counties.

Citizens is not supposed to compete with private carriers, instead offering insurance to those turned down by regular carriers.
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But if Citizens doesn't need the money to pay claims, why raise the rates, asks Bill Newton, executive director of the Florida Consumer Action Network in Tampa.

"When Citizens is forced to make unnecessary rate increases it keeps prices high for everybody," Newton said.

If private companies were forced to compete with Citizens it might restrain companies like State Farm and Allstate from raising their rates, he said.

The state politics-oriented blog Florida News has been covering downstate privatization scandals. Citizens Property Insurance is the other side of the coin: A state-owned business set up to fail by the legislature.

Well, they're doing a great job of it. Also yesterday, the much-heralded Citizens 'report' about hurricane settlement practices was delivered to state CFO Tom Gallagher and his industry-dominated 'advisory' panel. Paige St. John of Florida Today has the account.

The plea to the charge of being really, really lousy at adjusting insurance claims? Guilty as charged.

Citizens reported --

it has closed 79 percent of all hurricane claims, though there were still 5,273 claims where the damaged property had yet to be inspected.

Citizens' closure rate doesn't include commercial property, such as condominiums. It also doesn't include closed claims that were reopened.

Office of Insurance records show that as of Dec. 30, Citizens had 28 percent of its hurricane claims open, the second-worst closure record among major insurers.

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The system is still not working smoothly, task force members said.

Carol Everhart, representing the Professional Insurance Agents association, said she called the phone number publicized on Citizens' Web site. She waited on hold for 20 minutes only to be disconnected.

"It's an example of the frustration our clients are facing," Everhart said.

The sentence handed down by Mr. Gallagher? Two weeks probation:

Gallagher's Citizens review task force on Wednesday gave the company two weeks to draft a structure sufficient to handle the 1 million policies it manages. The plan is to include regional claims offices, an in-house system to track claims and a plan to work with the agents who sell Citizens policies.

Apparently, no one mentioned Citizens' other case-closing strategy of suing its policy holders and threatening the rest.