State’s ‘insurer of last resort’ creates a new way for Citizens’ customers to find alternative insurance providers

Jul 21, 2023

A house model, contract, calculator, and cash on a desk with two people talking in the background.

Florida insurance agents will soon be able to access a new online clearinghouse platform designed to make it easier to steer policyholders away from the state-created Citizens Property Insurance Corp., which predicts a record-high of 1.7 million accounts this year.

The new system, an enhanced rate comparison tool, is Citizens Eligibility Reimagined.

A homeowners insurance contract with a pen and small house model on a desk.

The $35.7 million investment, approved by the Citizens Board of Governors at a special meeting Friday, could ultimately result in as much as $130 billion in new-business risk avoidance, as opposed to the $9 billion it avoided in 2022.

A statement from Citizens read, in part, that it "is positioned to implement a new platform with broad private market carrier reach that enables agents, consumers, and policyholders to find adequate coverage more easily in the private market."

The new, 10-year contract (five years with succeeding one-year options) with Applied Systems Inc. is expected to boost the Citizens’ depopulation plan.

"This can help Citizens reduce its policy count if a private carrier (or several of them) are interested in ‘taking out’ policies that Citizens currently writes," said Alejandro Pérez Duque, Director of PVG Insurance Group on Key Biscayne. "These takeouts and clearinghouses have been done in the past with some success."

He said there are two important steps to making this beneficial for the property owner and Citizens.

"The challenge remains: 1.) How many carriers can take on more coastal risk at this time with the current windstorm reinsurance crisis? And 2.) What is the quality of those carriers? “ said Pérez Duque. “What I mean here is, what is their financial strength? Who is reviewing their books and rating them? Will they be there when policyholders need them? What special policy forms (exclusions/sub-limits) are they using in order to feel comfortable growing in Florida?"

Alejandro Pérez Duque.

Pérez Duque, a veteran in the insurance industry, also noted that the clearinghouse plan hadn't been a perfect science in the past.

"It is worth pointing out that some of the ‘takeout’ carriers that previously took on policies from Citizens went under last year ... and they came back to Citizens," he said. "So, for some policyholders, it’s like a boomerang effect."

Citizens' current web-based clearinghouse platform, launched in 2013 through Bolt Services, costs about $25 million. That contract expires this month.

According to Citizens Insurance, a 20-year company, the Property Insurance Clearinghouse now in place is designed to offer benefits and more options to Florida property owners because:

– Citizens policyholders often have more restrictive coverage and fewer options than those insured by private companies.

– Citizens policyholders can be required to pay much higher assessments if a major storm leaves Citizens unable to pay claims.

An pyramid graphic comparing assessments with a Citizens Policy vs Private-Market Policy.

– Buying a policy from Citizens when comparable private-market coverage is available increases Citizens' potential claims exposure and the assessment risk for all Floridians. In addition to property insurance policies, these assessments are levied on specialty policies such as auto, boat and pet insurance.

– Homeowners have expanded access to private-market companies that may offer more personalized and comprehensive coverage options than are available through Citizens.

– Homeowners who find coverage in the private market face a much lower assessment risk than Citizens’ policyholders.

– All Floridians benefit from Citizens' significantly decreased exposure and reduced assessment risk.

Florida law bars policyholders from remaining with Citizens if a market carrier offers similar coverage that is equal in price or no more than 20% higher than a Citizens premium. You also may apply for Citizens if no authorized Florida company will insure your property.

One downside to shopping with Citizens Insurance is that you need help getting a home insurance quote online. If you want to get a Citizens quote, you'll have to contact an agent.

An aerial view of waterfront homes in Pembroke Pines, Florida.

Usually, the maximum coverage from Citizens is $700,000. But, people living in Miami-Dade County or Monroe County can get up to $1 million of coverage, which might not be enough to cover the loss of an expensive home.

Flood insurance also has begun to be phased in, with all policies required to add that by Jan. 1, 2027.

In early June, Citizens officials asked the Florida Insurance Commission to approve a desired rate hike average of 13.1% in 2023 and 14% in 2024 for all personal lines of insurance.

Proposals that could lead to private insurers pulling as many as 184,000 policies from Citizens starting Oct. 17 were approved Monday.

Insurance Commissioner Michael Yaworsky signed orders approving the proposals by Slide Insurance (to take as many as 100,000 Citizens policies); Safepoint Insurance (up to 30,000); Southern Oak Insurance (25,000); Florida Peninsula Insurance (19,000); and Monarch National Insurance (10,000).

As of last Friday, Citizens totaled 1,345,403 policies, compared to 486,773 at the end of July 2020.