Citizen's Clearing house causes confusion for Florida Homeowner Insurance Consumers.

Florida's volatile property and Casualty market continues to cause confusion for Florida Homeowner Consumers.

The introduction of Citizen's "clearinghouse" program is a case in point.  Citizen's claims that the new program will benefit policyholders.  in the following ways:  Increase coverage by removing restrictions, increase coverage options for consumers, reduce exposure in the event of catastrophes, create expanded access to the private market for all policyholders, and create a benefit to all Floridians who do not purchase their insurance through Citizens by decreasing Citizen's overall exposure thereby limiting  thereby reducing assessment exposure.

Sound confusing?  It is.  First assessment exposure is generally not understood by Insurance consumers.  Briefly, Citizens is unlike regular companies.  If they incur losses, they can and will access (surcharge)  all policyholders in Florida for their losses.  Reducing Citizen's total number of policyholders will indeed reduce this risk to Florida's homeowner Insurance consumer.

Secondly, Citizens has the ability to further surcharge their own policyholders for additional amounts over what they are permitted to surcharge the consumer who purchases his or her insurance through the private marketplace.  Another plus.

So what are the negatives?   In my opinion there are two very big negatives:  Pricing and stability of the insurers in the clearinghouse program.

First the premium.   Florida's homeowner premiums have skyrocketed in recent years, for good reason. I won't go into those reasons right now, but briefly hurricane exposure, sinkhole exposure, cost of construction goods, and cost of reinsurance are the main reasons for the big increases.  So when someone is not able to purchase coverage through  Citizens, they save money, right?  Not so fast.  Many of the companies writing policies voluntarily in Florida have rates that are higher.  So people who are offered coverage outside of Citizens often pay more for the same coverage, or reduce their coverage options to save money.  Better coverage?  Only if you can afford it.  With many policies costing thousands of dollars these days, many consumers opt for less coverage, not more.

Second is the Elephant in the room. Who are the these companies offering takeout coverage and why haven't I heard of them before?.  You may ask yourself why isn't Allstate, State Farm, Geico, Hartford, Progressive, Aetna, and the other big name companies participating in the clearinghouse and/or the takeout programs?  Because they have decided the exposure isn't worth it?

So by and large the companies writing policies in Florida now are small, new, Florida based carriers without AM best ratings. Instead they carry a "Demotech’" rating of A which is controversial. For more on this see this link, http://www3.ambest.com/consumers/content.asp?refnum=116156, and then this article about a Demotech  A rated Florida Based Homeowner  Insurer who went bankrupt, http://articles.sun-sentinel.com/2013-06-12/business/fl-heritage-insurance-rating-review-20130612_1_heritage-property-business-model-rating-review, and finally this article about Florida Homeowner Insurance Companies and Demotech ratings, http://grok.typepad.com/life/2010/03/beware-of-florida-homeowners-insurance-companies.html.

With the new clearinghouse program, Insurance consumers will be steered towards these companies aggressively.  How they service their policyholders long term and whether or not they maintain themselves financially after a major hurricane or storm is unproven and an unknown.  If we judge their future performance by the past, it won't be all roses.  Time will tell. The following link is Citizen's clearinghouse "faq" for your consideration.


https://www.citizensfla.com/utilitybar/policyholderfaqs.cfm?show=pdf&link=/shared/faqs/FAQ_General_Final.pdf