Considerable decisions are ahead in the state as Citizens divests itself of a massive number of policies.
Within the next month, there will be almost 400,000 people in Florida who currently have homeowners insurance coverage through Citizens Property Insurance Corp., and who will be receiving notice in the mail from another insurer to advise the policyholders that their coverage will be transferred over to that new company by November 5, 2013.
At that point, the policyholders will need to make one of two choices that will be available to them.
The first option is that they will be able to refuse, so that their homeowners insurance coverage will remain with Citizens. This will mean that they will be accepting the risk relating to possibly reduced coverage or options as of January 2014, when a clearinghouse of $44.9 million that will come online and give agents within the private market the opportunity to hand select Citizens policies.
The other option is that policyholders can continue their homeowners insurance with the new insurer.
The home insurance customers can opt to accept the coverage being offered by the letter by the new private insurer, the “takeout company”. There are 10 smaller carriers that will be taking on the role of takeout companies. The risk that policyholders are taking by choosing them over Citizens is that they do not have the same limitations as the state backed insurer. For example, they are allowed to raise their premiums by an unlimited amount once a policy’s renewal date occurs.
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This change to the homeowners insurance environment for Citizens customers is the latest element of a largely aggressive and highly controversial decision by Florida Governor Rick Scott, as well as the state Legislature, in order to help to shrink the size of Citizens Property Insurance, which currently sits at a bloated 1.2 million policies, which are all subsidized by the state.
Within the current law in the state, Citizens has not met the cash requirements for the homeowners insurance payments that would need to be paid if a powerful storm should strike. In that event, policyholders of other coverage lines, as well as state taxpayers would be required to pay higher fees in order to cover those payments.