Rep. Bryan Nelson, R-Apopka, and Sen. Garrett Richter, R-Naples, chairmen of their respective chambers’ insurance committees released a three-part position paper that highlights the hidden risks all insurance policyholders face in the event of a devastating storm. Even if the Florida Hurricane Catastrophe Fund (CAT) and the Citizens Property Insurance Corp. are in their best financial shape in years, the pair argues that the programs’ relative health conceals their vulnerability and the risks it could yield to its policyholders.
Despite general agreement that Citizens rates are artificially low, and the CAT fund remains to be vulnerable, solutions continues to be elusive. Political leaders must struggle with a cold and hard reality that about 1.5 million policyholders rely on the state-backed insurer while millions more rely on the CAT fund.
Nelson pointed out that 60% of the state’s population lives within 10 miles of the coast and it would mean political suicide to force them to pay whatever the premium is.
Both chairmen are expected to again lead industry-backed efforts to return more of the market to private companies and away from state-backed insurance presently being offered at below market rates.
On the other hand, critics maintain that lawmakers should be extra cautious about such claims. Critics stressed that the chances of a major storm or series of storms breaking the bank are very low.
Sean Shaw, a former Florida insurance consumer advocate whose law firms now represents homeowners, stated that these are only ridiculous scare tactics that comes from the insurance rate hike dream team.
To outline their case, Nelson and Richter released a series of opinion cases which explained that hidden behind artificially low premiums are the possibilities that policyholders of all stripes will be hit with assessments if Citizens and the CAT fund fall short.
Nelson further said that even if attempts can be made to raise premiums for existing Citizens customers, it would be hard to wean policyholders from the plan. Chances are, lawmakers will only modify assessments and make it even more difficult to become a Citizens policyholder.
Nelson added that it won’t seem like such a great deal if they keep people from getting into Citizens.
Both sides have outlined and justified their positions. Nelson and Richter’s opinion piece indicates that a storm costing Citizens more than $13 billion could lead to assessments that nearly double premiums for Citizens policyholders the year following a storm.
But on the critics’ side, Shaw claims that the odds of it happening are only about 1 in 100, and that raising rates too high will have its own consequences as the state tries to regain its economic strength.
Shaw concluded that if the rate hike dream is considered, there will be a 100 percent chance that the delicate housing recovery will be ruined.
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