Jim Malone, the CEO of Citizens Property Insurance, heads the state-run insurance company that insures property as the last resort. When policyholders can’t get coverage from any other insurance company licensed to do business in Florida, then Citizens will insure. But the costs of running a state insurance organization do tend to go up.
A Naples entrepreneur, Malone brought up the idea of privatization in a board meeting this week. The proposed idea is to reduce the state’s financial risk which continues to increase as policyholders are added to the pool at the rate of “4,000 to 5,000 people a week.” The way Malone sees it, the lower-than-market rates are not keeping up with the increase of exposure. This is a relatively simple concept with the understanding that the price may go up, but it also may go down in relation to the insured risks involved.
The Insurance Information Institute explains that Citizens has half the total number of all state-run policies and 70% of the risk based on the value of insured real estate. For example, in Collier County there were 24,316 policies as of June 30, 2011, up from 21,211 in June 2010. Over the years Citizens has become the third largest property insurance carrier in the country and the largest in the state, but all of its risks are in Florida.
Chairman of the Senate Banking and Insurance Committee, State Senator Garrett Richter (R-Naples), supports the idea as a starting line and careful study. His point is to attract more underwriters to the state in an effort to reduce premiums.
Tim Shaw of Tim Shaw Insurance Group, Inc. in Fort Myers and Naples also supports privatization. Shaw’s point is that the burden that all state policyholders would have to pay when losses increase mainly on the coastline is shared. The program wasn’t designed for homeowners who don’t live on the coast. This design tends to reduce competition.
If privatization will help drive down the cost of insurance, Gov. Rick Scott said, “I want to look at it very closely.”
Jim Malone is taking the appropriate step to move the status quo on Florida property insurance.