Normally we do not address State or Federal tax issues. However, when we hear of a State mandated assessment that will affect almost all
What we have determined so far is disturbing and sets a very bad precedent. As a Martin County property owner you are about to have a new 6.8% increase in your homeowner’s insurance bill imposed on you, with virtually no discussion, by the Board of the Citizens Property Insurance Corp. (CPIC). Last year this State “company” lost over $500 million dollars covering damage to otherwise uninsurable homes and businesses from our 2004 hurricanes. The State Treasurer / Insurance Commissioner has now set out to recover those funds. The method is essentially a surcharge applied by the State to the already large rate increases in property insurance being assessed, or in the pipeline, from private insurers. This is being advertised in the press as a modest increase of only $60 or so per year for the “average
The CPIC was created by Florida Statutes in 2002 to: “… provide certain personal and commercial coverages to qualified risks under circumstances specified in the Statute.” In plain English, the CPIC is the State created and subsidized insurer of last resort to Floridians who cannot obtain property insurance through normal sources. The next question was: who are these uninsurable individuals/businesses, and what qualifies them to be eligible for our subsidies? Going to the CPIC’s official website provides an official 60+ page “plan of operation”, but little quantifiable information as to what justifies eligibility for obtaining insurance from them. A whitepaper published by the Florida Bankers Association (FBA) seems to answer some of this by pointing out that their banks arrange for many CPIC insurance policies as a condition to providing financing. The implicit assumption is that to be eligible for a policy you must be able to qualify for a loan on the property, but normal insurance companies do not think you are a reasonable risk. How this justifies public financial support is not answered, but the final paragraph of the Banker’s whitepaper does add context to the need for funds: “.. premium rates of [CPIC] are supposed to be non-competitive with (higher than) rates of the open market; however, they do not seem to be high enough to discourage new customers from purchasing policies....If [CPIC] wishes to decrease the number of policies, increasing premium rates may be the ... route to follow.”
While we do not claim to be qualified to question policies of the State Treasurer or Insurance Commission, we do agree with the theme of the FBA whitepaper. The State should only write as many policies as absolutely necessary to cover those with justifiable reasons for being uninsurable and not be in competition with insurance companies. Our bottom line: the CPIC should raise premiums on their “uninsurable” customers, at least to the point where the State breaks even, rather than "tax"