Take stock before leaving Citizens for a private insurer

Posted by on Feb 17, 2012 | 0 comments

Paul Owers, Sun Sentinel

Florida’s largest insurer faces a big risk from hurricane damage and is trying to reduce it by shifting customers to other carriers. But policyholders must do some homework before accepting a transfer, consumer advocates say.

If they decide in favor, they will help shrink state-sponsored Citizens, which has 1.5 million policies and more than $500 billion. The transfers are part of a program approved by the Legislature to reduce the need for post-storm charges if Citizens runs out of money.

Everyone in the state may be charged up to 6 percent of his annual premium if Citizens lacks money to pay claims after a storm. But Citizens policyholders would pay first and could pay the most — up to 45 percent of their premiums.

A few thousand offers are sent to Citizens customers by private insurers every other month. Homeowners who accept the offer sometimes pay higher rates. But if they stay with Citizens, they face the possibility of a steep assessment.

That’s ultimately what persuaded Ray Oneidas, 85, of Tamarac, to leave Citizens recently. Oneidas, who owns a two-bedroom house, said his Citizens premium is $1,800 and he’ll have to pay only $100 more a year for the same coverage with Florida Peninsula Insurance Co. of Boca Raton.

“I decided to get away from Citizens,” he said. “I don’t want to be liable for any deficits.”

In general, a private insurer provides “more robust coverage” with a lower risk of assessments from Citizens, said Roger Desjadon, president of Florida Peninsula.

Sean Shaw, founder of Policyholders of Florida, which calls itself a pro-consumer group, agrees that it’s best to have coverage from a private insurer because Citizens needs to be smaller. In the past, though, he said homeowners who switched complained about rate increases after the first year, when their policies were renewed.

Citizens has 212,621 policies in Broward County and 145,291 in Palm Beach County.

In addition to closely checking rates, homeowners should make sure they aren’t switched to a private company automatically. A letter sent to Citizens policyholders by Florida Peninsula says they must specifically reject the offers or their policies will be switched automatically.

The state allows for that wording because it’s trying to encourage customers to leave Citizens, said Jack McDermott, spokesman for the Florida Office of Insurance Regulation.

Shaw said customers who do nothing shouldn’t face losing their Citizens coverage. “You don’t want people to get [moved] into another insurance company just because they didn’t respond,” he said.

Comments are closed.