Citizens Insurance Wants to Turn Me Into ‘Take Out’

Apparently, there’s a subsidy plan to use my premiums to pay private insurers to take over its policies. On the other hand powerful figures in the state GOP are lining up to support gifts to their friends.

My experience suggests the program isn’t necessary: although the program is not operating yet I’ve gotten my first letter of the post-hurricane season from a new, small, (fly-by-night?) insurance company called Homeowners Choice Property & Casualty (HCI) that has got me on its menu as “Take Out”.

“Take-out” is how Citizens refers to the policies cherry-picked by private insurance companies. And perhaps because I live relatively far from water and thus face less flood risk, I’m the cherry.

These letters follow a form. They have threats about how awful Citizens will be, threats founded in fact if skewed to the worst case. They are opt-out only: do nothing and I will be transferred to the new company about which I know nothing.

When I got the letter, HCI didn’t even disclose the terms of the policy they are offering me. Although the letter contains vague language about covering “other structures,” like gazebos, that I don’t happen to have, and mentions some “coverage options”, the real meat was supposed to be online. I was invited to go online to view financial info and see “a coverage comparison”. There is some financial information about HCI at Citizens’ “Take-out Companies” page, but when I visited last week, there was nothing about policy terms there. Checking back today, however, I find that there is now a summary coverage analysis document. Bottom line: very little difference — for now.

And of course there’s no reason to believe the premiums will be any less with any given company than with Citizens’: HCI is required to keep my policy for at least 10 years (unless they go broke first), provide “substantially the same coverage” as Citizens for the first three years, and limit rate increases to 10 percent per policy per year. Such comfort.

HCI’s homepage is not much use to me either. They tell me they are rated “A Exceptional” by Demotech, which is the rating agency for insurance companies too small to get a rating from AM Best. Looking at Demotech’s site, I find that “Exceptional” is only the third-best rating (everyone is waay above average here!), and means that according to some model (about which we are told nothing) Demotech thinks that 97% of the companies with this rating will be solvent 18 months from now. An A rating puts HCI in the top 70% of companies rated by Demotech. Yes, top 70%! (Not surprisingly, the Demotech ratings have been accused of being inflated.)

A little Internet searching tells me HCI just recently doubled in size by taking over policies from HomeWise, a failed insurance company. Was that before or after they got their rating?

Given that Governor Scott’s team, gripped by anti-government ideology, seeks to destroy Citizens Insurance by continually raising premiums and cutting coverage even though Citizens now has the $6+ billion reserves we always were told it would need to be solvent, I might actually be prepared to consider opting out some day despite my earlier reluctance. But I’d have to know what I was getting, and to have more confidence about the company I was going to than HCI has been willing or able to provide.

The track record so far for these insurance startups is sort of what I’d expect:

The granddaddy of onetime Citizens’ takeout companies, Poe Financial Group, was swamped with hurricane payouts and fell into Chapter 11 bankruptcy reorganization in August 2006 after storms caused more damage than it could cover. To pay for Poe, the state assessed everyone in Florida who buys homeowner or auto insurance. Lightning struck again with Magnolia Insurance, which was the biggest participant in a Citizens takeout program in 2009, the year before it went out of business. Another takeout firm, HomeWise Insurance Co., failed in 2011 and its policies were assumed by Tampa-based Homeowners Choice, which is the single-biggest takeout company participating in this round. Scott Wallace, the past president of Citizens Property Insurance, is now president of Homeowners Choice.

Looks like I’m opting out of this one too.

Update (10/11): Great article on some of the pros and cons of opting-out of Citizens from Tampa Bay Times. Where is the Miami Herald on all this? Fun fact: 30% of Citizens policy holders opted out last time letters went out — that’s a lot for an opt-out program. Citizens is cranking up the propaganda to reduce that number.

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8 Responses to Citizens Insurance Wants to Turn Me Into ‘Take Out’

  1. Jason says:

    Thanks for writing about this. You and the Tampa Bay Times are the only ones that seem to care. I received a letter as well from HCI and my agent was mostly unhelpful. Basically it is a gamble, stay or go. But with HCI there are no rates or policy specifics. Also I am unsure HCI must abide by the yearly rate increase caps Citizens has. I am certainly no fan of citizens, but this “take out” seems more like a scam to me than not.

  2. Claude Griffin says:

    Heritage Insurance sent me a letter saying sign agreement to transfer insurance or face the possibility of paying 45% above present premiums, ad nauseum. This is harrassment. What we need is a class action lawsuit. The insurance companies are feeding off fear they engender and overcharging us already. Citizens and their cohorts have been written up in the news several times for corruption. Thanks for this link. I want to support you in whatever way I can.

  3. Alex Dalmady says:

    Great article. I’ve had to “opt-out” six or seven times already. And the letters keep on coming.
    One tip: call the take out company to confirm that they have your instructions and GET THAT CONFIRMATION IN WRITING. Heritage tried to assume my policy and despite emails, faxes and calls from my agent and myself, they failed to notify Citizens of my opt out of the take out. I had to file a complaint with the Better Business Bureau to get back to Citizens.

    • Enrico says:

      I am having the same issue now. Heritage took over my insurance even thought I opt out in the past. Saying they sent me a letter which I never received. Can you tell me how you ran the complaint to BBB? And what helped you getting it back to Citizen?
      Thank you

  4. Richard Fechter says:

    I made the mistake of not opting out dispite the lack of information available. I live in miami-dade. I was taken out by souther oak in april 2013…my citizens policy was up for renewal January 2014. Southern oak could give me zero information regarding my new premium, the type of coverage, or anything else for that matter at the time i was required to either opt in or out (such a process is unconscionable). Well, I got my new premium notice which is 40% higher than last year’s citizens policy – from $6,400 to $9,000. Can you imiagine $9K to insure a $300K home in west miami-dade. Governor Scott, the Insurance commissioner, and the rest of the florida legislature should be tar and feathered for their morally bankrupt way they are treating their citizens.

  5. Eric says:

    Homeowners insurance does not cover flood.

  6. Craig says:

    I wanted to thank others for your comments. I just got my take out letter from Homeowners Choice. I think I would prefer the devil I know than the devil I don’t know. My parents had a miserable time making a claim with a bankrupt insurance company and going through the state back up insurance. The lack of information on this subject is disappointing.

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