McCarthy Puts His Foot Down - Quietly

[T]he Insurance Commissioner doesn't 'intend to order either insurance company to tell policyholders they have that choice... .' Instead, he's leaving that up to the private sector of individual insurance agents.'

Paige St. John is reporting for Gannett News publications around Florida that state insurance commissioner Kevin McCarthy yesterday ordered Citizens Property Insurance to take back as many as 100,000 customers who were "sent to private companies that then increased their rates." Among those affected are over 1,000 Escambia County property owners -- many of them on Pensacola Beach. [The numbers of customers affected, sorted by county, are given at the end of this version of St. John's article.]

Edited versions of St. John's article are appearing in multiple Gannett Corp. news outlets around the state including today's Pensacola News Journal. Essentially, McCarthy's action is intended to partially alleviate, although not entirely correct, the highly imprudent "out-sourcing," or privatization, of existing wind insurance policies which were held originally by the state-owned Citizens Property Insurance Co.

We wrote about this over a year ago. (See "Depopulated to a Dog" and "Depopulation: The New Insurance Storm".) In the late spring and summer of 2005, local homeowners began receiving an imperious letter from Citizens informing them that their wind policies were being transferred to privately owned insurance companies in South Florida.

The private companies were taking advantage of the notoriously bad state law that invites just about any Tom, Dick or Harry to set up a new insurance company with or without much money behind it, cherry-pick existing policies from Citizens Property Insurance, and then collect a cash bonus from Citizens Property for taking the policies off its hands.

St. John explains what happened next:

"At least two ... smaller insurers, Florida Peninsula Insurance Company and HomeWise Insurance Company, pulled policies out of Citizens and then took advantage of a provision allowing them to raise rates before regulatory approval.

"Those policyholders found themselves forced to accept coverage at premiums nearly double Citizens' already high rates."

In issuing the rare "take back" order yesterday, which allows the unfortunate customers to return to Citizens Property for wind insurance coverage, McCarthy issued a press release acknowledging that the transfer had caused "a financial nightmare" for homeowners. What McCarthy's press release neglects to mention is that last year he was issuing statements about how "reassured" he was to see the out-sourcing of those policies to new, untested, private insurance companies that existed largely on paper, only.

As Paige St. John summarizes, now beach homeowners "have the option of returning to the state's insurer-of-last resort" from the two privately owned companies that have been screwing them. But here's the rub: the Insurance Commissioner doesn't "intend to order either insurance company to tell policyholders they have that choice... ."

Instead, he's leaving that up to the private sector of individual insurance agents.

Can you believe it? Kevin McCarthy is the top insurance regulator in Florida -- and he can't be bothered to notify insurance customers that he's changed their options?

Once again, ideology trumps common sense. Now, state officials are privatizating the notification to citizens of their rights -- even as those same state officials admit the earlier state-ordered mandatory privatization caused those same citizens a "financial nightmare."

When the 'depopulation' notice arrived in the mail last year, insurance agents around the state were telling cutomers they had no idea what was going on. "We're the last to know," our own agent told us. All he could say for certain was that he wasn't authorized to act as agent for the 'new' private company, Florida Peninsula, and we were on our own if we wanted to know how financially sound it was.

Some day, maybe, when things are slow and that ex-insurance agent of ours doesn't have anything better to do he might get around to giving us a ring to let us know that a state government official entered an order that gives us the option of returning to Citizens Property Insurance. If he does, he's got our vote if he ever runs for public office.

Kevin McCarthy's already a government official but apparently he can't be bothered to let us know what he's been doing.