From The Palm Beach Post

State House begins looking into the ills of Citizens insurance company

By Alan Gomez

10/19/2005

TALLAHASSEE — Legislators took their first crack Tuesday at what is expected to be a months-long look into the inner workings and failures of Citizens Property Insurance Corp., the state's home insurer of last resort.

On the heels of a four-storm 2004 summer that left the company short $516 million and besieged with thousands of complaints over how they handled claims from those storms, Citizens recently has been faced with ethics allegations at the top of its administration.

Its chief financial officer resigned in September after he was accused of taking kickbacks from a Texas firm in exchange for work in Florida and two other executives were forced to resign after allegations that they conspired to create a company to do business with Citizens.

At the same time, Citizens probably will be asking homeowners to pony up more cash for insurance coverage. The insurer's board will vote on an average 37 percent rate hike next month.

And Citizens already is reaching into the pockets of every homeowner in Florida to cover the $516 million deficit incurred after last year's hurricane season. Homeowners statewide must pay $68 for every $1,000 in annual insurance premiums they already pay.

State officials have responded to the ethical questions with a bill that would require Citizens, a quasi-governmental entity, to implement the same conflict-of-interest rules that are required of top-level state officials.

The bill, sponsored by Rep. Dennis Ross, R-Lakeland, and Sen. Mike Fasano, R-New Port Richey, and endorsed Monday by Attorney General Charlie Crist, was debated for the first time Tuesday by the House Insurance Committee. The Senate's Banking and Insurance Committee will discuss Citizens again today.

Also Tuesday, Florida Insurance Commissioner Kevin McCarty asked all the state's quasi-governmental insurers to submit their standards of conduct for their senior officials and asked them to consider amendments that would improve accountability.

Some members of the House committee were disappointed by a Citizens presentation Tuesday, when Rep. Randy Johnson, R-Celebration, said they asked for too much autonomy in fixing their internal problems. "It's like locking the bank vault after the money is gone," Johnson said. "And now we're just supposed to take their word for it? I think that we need a top-down, bottom-up review of Citizens."

Ross, the chairman of the insurance committee, said the panel will be patient in its analysis of Citizens, waiting for ongoing investigations by the state into possible criminal behavior at Citizens.

"My focus is trying to facilitate Citizens in making sure that they do the internal enhancements to their procedures so that we don't have a repeat of the situations and the allegations that are out there now," Ross said.

But Ross and others warned that focusing solely on the ethical problems faced by Citizens could leave the company's biggest problems — producing affordable and available homeowners insurance to the state's hardest-to-insure properties — left behind

In addition to the average 37 percent statewide rate increase that will be voted on next month, a study released last week said that Citizens should jack up windstorm rates an average of 80 percent statewide.

Citizens high-risk pool covers 775,000 properties in coastal areas where private insurers refuse to cover hurricanes. That includes 62,500 homeowners in Palm Beach County and 2,000 homeowners on Hutchinson Island in St. Lucie County. The insurer has no wind-only policies in Martin County.

"Clearly there's a perception out there that things were out of control... and they've got to address them," said Rep. Carl Domino, R-Jupiter, a member of the insurance committee. "But at the end of the day, will that really impact the fact that their rates are going up a whole lot? Probably not. And that's what we have to deal with."