Island Management - Sanibel Island, Florida

Insurance Update March 2007

Officials approve stronger Citizens plan

TALLAHASSEE, Fla. – March 14, 2007 – State officials approved a new business plan for Citizens Property Insurance, allowing the state-run insurer to be more competitive with private insurers and offer some savings to policyholders.

The plan, required by the new insurance law passed in January, calls for Citizens to offer a complete policy covering windstorm damage as well as fire, theft and liability in the state’s designated windpool area.

Bruce Douglas, chairman of Citizens’ board of governors, told the Cabinet that 900,000 policyholders, out of its total 1.3 million, already have multiperil coverage with the company.

"This plan is a natural extension of what Citizens already does," said Douglas. It would make Citizens more efficient because it would have to service just one policy. Also, the company estimates that policyholders who opt to buy a single, complete policy from Citizens will see a 10 percent reduction in rates.

Mixed policies

Out of its 400,000 windstorm-only policies, some 118,000 homeowners have their fire and theft coverage with a private insurer. The remainder already have all their coverage with Citizens, but in two separate policies.

The insurer is hoping those 118,000 opt for Citizens’ single policy. But Douglas said the company realizes these homeowners might have multiline discounts with their current private carrier, such as for autos and home. That discount could be greater than the savings Citizens is offering. Douglas also noted that with expansion Citizens can “compete with the voluntary market.”

Both Citizens officials and state lawmakers are hopeful that element of competition could bring about some lower rates from the private insurers, possibly fearful of losing business to the state-run pool. Gov. Charlie Crist endorsed that approach in comments before Tuesday’s meeting.

“The more rate reductions that we have, the more competition Citizens is able to present, the greater empowerment there will be of the people,” he said.

Tough questions

Chief Financial Officer Alex Sink grilled Douglas on Citizen’s marketing and customer service plans. He assured her that Citizens will be conducting meetings statewide with policyholders to get feedback – the first will be in Fort Lauderdale in May – and its meetings with agents will “get input on our level of service and where we’re falling down.”

Crist jokingly asked Douglas whether Citizens’ marketing plan would involve a little green lizard – alluding to the green gecko in Geico’s auto insurance commercials that tells consumers, “I’m going to save you lots of money and I love my job.”

Douglas promised no lizard. Instead, he said Citizens is educating agents to understand the company’s expanded coverage and inform consumers: “Here’s what we’re offering. Here’s how to do it. Now go out and do it.”

The plan still needs to be approved by the Legislative Budget Commission later this month before Citizens implements it.

We advise all to contact an insurance professional to discuss your insurance needs. If you need help finding an agent please email steve@islandmgmt.com for assistance.