State-run insurer Citizens expects offers from private insurers amounting to half its 1.2 million customers by December, putting it on course to shrink to its smallest size in at least seven years, the company’s top executive said Friday.
President Barry Gilway called the volume of offers “staggering.”
The latest numbers: About 200,000 offers in the pipeline for December, adding to about 400,000 in November, or around 600,000 for late 2013.
That doesn’t mean all of those customers will leave. Citizens customers can choose to stay after they get letters from private insurers, and if there are multiple offers for the same customer, the system will sort it out so homeowners get only one letter, a spokesman said.
Still, Gilway expects Citizens to downsize to its the lowest level since early 2006, less than 900,000. As recently as a year ago, Citizens had nearly 1.5 million customers.
“This is a continued success,” he said.
Gilway acknowledged one of the biggest problems remains getting good information comparing rates and coverage to consumers. Citizens customers at a recent forum in Delray Beach told Gilway they were cautious about switching if they don’t know much about the new companies, which are virtually all Florida-based or start-up carriers, not national brand-name insurers.
In the past, Citizens customers have often returned after private companies dropped them or increased rates.
But another factor likely to shrink Citizens in 2014, apart from the takeout offers, is a new clearinghouse. It is designed to make Citizens customers ineligible for its policies if a private insurer offers coverage for the same price or lower. Also, new customers can’t enter Citizens if a private insurer is offering a policy priced within 15 percent.
Citizens will raise rates 6.3 percent overall in 2014. That’s below a 10 percent state cap on annual increases, indicating many of its customers are reaching rates the company considers adequate. Wind-only coastal customers are likely to continue seeing rate increases around 1o percent, but others are paying premiums high enough that private insurers want to take them.
Also encouraging more interest from the private market: Key costs for insurers such as reinsurance are falling as Florida hasn’t seen a direct hit from a major storm in eight years.
Citizens has about 120,000 customers in Palm Beach County, down from a high of close to 150,000 a couple of years ago.
Chief financial officer Jennifer Montero said at a meeting of the company’s board Friday that Citizens has never been in better financial shape.
Its surplus, a big pile of reserve money that can be used to pay claims, has climbed to $6.8 billion, and it has $18.5 billion to cover claims through such back-up sources as the state’s catastrophe fund. At the same time, its risk exposure is falling as customers leave.
Citizens could handle a repeat of 1992’s Hurricane Andrew, the state’s worst modern storm, without having to charge assessments to customers of other insurance companies, The Palm Beach Post found. Its own customers would face a fee of $8 on a $2,000 policy.
Montero called it the company’s “best financial position ever.”
Citizens could still make itself more efficient, Gilway said. For example, it could save up to $14 million a year by reviewing its use of outside vendors and performing more core functions internally, according to an outside management review unveiled at the meeting.
An analysis by KPMG found Citizens’ expenses were lower than a group of private insurers and other state-run carriers, but concluded there were ways it could do better.
The state-run insurer expects to have less than 900,000 customers after a record number of offers from private insurers to take its customers by year’s end. That would mark its smallest size since early 2006.
Date Citizens customers
Today 1.2 million
Sept. 2012 1.5 million
2011 1.5 million
2010 1.2 million
2o09 1.1 million
2008 1.2 million
2007 1.4 million
2006 1.3 million
Source: September reports for each year from Citizens Property Insurance Corp.