Who cares, right?
Well, if you’re a Floridian who owns or rents a house or apartment, drives a car, owns a boat, or owns a business, you should care. Everyone else may utter a collective “meh” and read something else.
For those of you still reading, Citizens is the state-run property insurance company that was created years ago to provide coverage for people who couldn’t find it from private insurance companies. Unfortunately, in 2007 Charlie Crist changed the law so that almost everyone qualified for coverage through citizens AND its rates were actually reduced and frozen–arbitrarily by politicians. He did this to “lower rates.” Talk about the government having an unfair competitive advantage!
The result of that unfair competitive advantage is that with over 1.25 million policies in force, Citizens has grown to become the largest provider of property insurance in the state.
Again, why should you care?
The reason you should care is because Citizens doesn’t charge enough money for the coverage it provides. So if Florida were to experience a sufficiently bad hurricane season, and Citizens doesn’t have enough money to pay the claims that results from it, we will all have to bail it out to the tune of hundreds (or in extreme cases, thousands) of dollars a year for several years through assessments (taxes) on our car, renters, homeowners, business, and/or boaters insurance.
For example, let’s say a Hurricane Andrew-size storm hits Florida, and Citizens finds itself out of money and unable to pay claims. If you pay $2000 per year for your property insurance coverage, and $1000 per year in car insurance, you’ll wind up paying an ADDITIONAL $123 per year for 30 years for the very same coverage you receive today.
To figure out how much assessments you would have to pay, please visit the State of Florida’s Assessment Calculator.
So yesterday, the board that runs Citizens elected a new president to run the government-owned company.
Meet Barry Gilway, 66, Citizens’ new president. Given the challenges ahead, I don’t know whether to congratulate him or not.
He has over 40 years of experience in the insurance industry, including heading the Seattle-based Mattei Insurance Services and serving as an executive for the global insurance conglomerate Zurich. Gilway replaces interim president Tom Grady who has overseen Citizens for the past several months and has been a leading proponent of reform within the organization.
Although Gilway’s resume is an impressive one, the bigger story here is that he acknowledges that Citizens rates are currently inadequate and a key component to any reform proposal must address that inadequacy.
“There clearly has to be a mechanism in place to get rates to a much more adequate level,” Gilway said. He also went on to state that Citizens having “appropriate rates” would help attract more private insurers to enter Florida and do business here.
So basically, he’s saying that if Citizens charges appropriate rates like the private insurance companies are required by law to do (meaning, charging enough so they can actually pay claims), more private insurance companies will be willing and able to compete.
In response to that, we in the common sense business would say “duh!”
Right now Citizens can charge rates well below what they would need to in order to cover its liabilities because they have the luxury of being able to tax people after the fact if they ever found themselves without money. Private companies can’t do that–they need the money up front, or they go bankrupt.
Those of us watching what Citizens does in the next few months have only Gilroy’s experience and his statements during the Citizens Board interview to go by. Both are good signs in that they seem to indicate that he will pursue the kinds of reforms that Citizens needs to get back to its original intent and reduce the risk on taxpayers.
Unfortunately, liberals and many putative conservatives will fight to preserve this unsustainable government-run, taxpayer-subsidized boondoggle in the name of “consumer advocacy.” Make no mistake, it’s nothing more than government-sponsored market distortion that drives competition away and gives cheap insurance coverage to some at the expense of the state’s taxpayers.
True free-market conservatives would never support this, and we will hold accountable those who do, especially those who condemn Barack Obama for doing the same thing.