Not long ago, my home insurance company unfriended me.
It came in the form of a "takeout" letter, informing me that my business was no longer welcome. And yes, I live in Florida, where our state motto is, "We're all here because we're not all there."
My ex-insurer, Citizens, is the big dog in this state, created in 2002 as a tax-exempt, not-for-profit government agency to save our collective bacon after most private insurers fled the peninsula in the wake of Hurricane Andrew a decade earlier. If you can't find a private insurer willing to sell you an affordable home policy -- and not long ago you couldn't, thanks to hurricanes Wilma and Rita that came in the years following Andrew -- Citizens has to take you.
In creating this fairly sound insurer of last resort, state lawmakers included a mandate that requires Citizens to "depopulate" by shedding its policies as soon as private insurance companies step forward to assume the risk. Which is only fair considering that the citizens of Florida would be tapped if Citizens takes a hit from a major storm.
As a result, Citizens' policy count recently dropped from a high of nearly 1.5 million to under 1 million, with 500,000 the eventual target.
Breaking up is hard to do, but Citizens has it down to an art. They didn't say it's over-over exactly; more like it's time for one of us (namely, me) to move on, because my premiums are going to pop and they're withdrawing my sinkhole and pool cage coverage.
But don't fret, they said, we've found you the perfect match, a local home insurer who's hungry for your business. I later came to suspect they found my "takeout company" on Craig's List. My golden retriever was older than this company, and its quoted rate was higher than Citizens'. I eventually chose a carrier on my own.
'Coercion' and 'mugging'?
Takeout tales are common in Florida these days, and few homeowners are laughing. Seven takeout companies have gone belly-up since Citizens began its depopulation drive, with the most recent -- Sunshine State Insurance -- leaving $36 million in unpaid claims and refunds in its wake.
"Many of these companies went under because they did not have enough reserves to pay claims," writes Tampa Bay Times columnist John Romano. "And why didn't they have enough reserves? Because they were shifting money to management firms -- which are often subsidiaries of their own company -- which made huge profits."
Those takeout letters? Gavin Magor, a senior analyst at Weiss Ratings, a Florida-based watchdog organization, has another name for them. "It's basically coercion," he told the Times. "You're being mugged with those letters." Weiss says that of the 50 or so property insurers in the state today, 20 rank as "weak" or "very weak," meaning that 40 percent could be in danger of folding.
And here we thought hurricanes were our biggest homeowner risk.
Here's how private insurers are wading in to help homeowners battered by flood insurance reform.
Follow me on Twitter: @omnisaurus
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