A panel of state officials have embraced new plans by the insurer of last resort.
A proposal by the state run homeowners insurance company, Citizens, has now been accepted by Florida lawmakers, changing the current regulations so that the company will now be able to provide private insurers with loans of up to $350 million in order to encourage them to provide residents of the state with coverage so that the company will continue to shrink.
The largest insurer in the state currently covers over 1.4 million policyholders.
The insurer has been making massive efforts to shrink the number of homeowners insurance customers that it has, in order to comply with Governor Rick Scott’s requests that it do so. The new incentive plan would help to shed an extra 300,000 policies from the company. They will likely be picked up by private insurers that would typically charge higher premiums.
This will help to avoid the homeowners insurance hurricane tax that could be assessed in the future.
These hurricane taxes could happen if Citizens finds itself unable to pay its homeowners insurance claims in the future. While the members of the House Insurance and Banking Committee embraced the new plan, only three insurers have expressed any interest in participating, so far.
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According to Rep. Bill Hager (R-Boca Raton), “I think we need to do everything in our power to make it smaller.”
The company was created in the first place as an insurer of last resort for individuals who required homeowners insurance but who were living in areas where the risk levels are higher. Its lower rates made its coverage more affordable to residents than the policies offered by private companies. Unfortunately, the number of people covered by the insurer has ballooned out of control.
Officials in the state are now concerned that if another storm like Katrina should ever hit the state, a “hurricane tax” would need to be imposed on all homeowners insurance customers in order to help to be able to cover the claims that would result. Many worry that a single catastrophic storm could change the entire industry in the state if the appropriate precautions are not taken.