A startup insurer that gave $110,000 to a political committee affiliated with Gov. Rick Scott is one of only four carriers to get first crack at steering customers from state-run insurer Citizens when a new clearinghouse starts Jan. 2, records reviewed by The Palm Beach Post show.
Heritage Property and Casualty Insurance Co. of St. Petersburg has gone from zero to 92,000 customers in about a year. It received more than $30 million to take Citizens customers in a controversial deal this spring when most other carriers got no special sweeteners. Now it will join the lead foursome in the clearinghouse.
Seventeen insurers have signed up for the clearinghouse, records prepared for a Citizens meeting Monday show. A Citizens spokesman said the order of deployment was decided in consultation with a contractor, Connecticut-based Bolt Solutions Inc., and other companies were “largely in agreement” with the plan.
“As a governmental entity, Citizens ought to be concerned with the appearance of cronyism,” said William F. “Chip” Merlin, president of the Merlin Law Group, which represents policyholders with offices in Tampa, West Palm Beach and other locations. He has served on statewide panels on issues involving Citizens.
Merlin said he supports the concept of the clearinghouse, but as for Heritage: “This company gets great deals. They seem to have a jump on everybody in getting free money from the government.”
Three to four more carriers will be added to the clearinghouse Jan. 26 and another three to four March 1, Citizens records show.
Early birds could benefit. An average of 3,500 to 4,000 new customers enter Citizens each week, company officials say, but those customers will be ineligible for the state carrier if a private insurer in the clearinghouse is offering coverage priced up to 15 percent higher than the Citizens premium. By the second quarter of the year, the company says, the clearinghouse will be ready to determine whether existing customers trying to renew Citizens policies will be required to take coverage from a private insurer offering the same premium or less.
Others in the Jan. 2 group are Boca Raton-based Florida Peninsula Insurance Co., United Property & Casualty and Safe Harbor.
“The major issue was which companies could be up and ready given what has been a very aggressive timetable,” Citizens spokesman Michael Peltier said. “The first round of insurers were both willing and able to be up and running by Jan. 2. Others had requested or needed more time to bring their internal systems up to speed to be able to work with the Bolt Solutions software platform.”
Later in the year, when renewal business of about 20,000 policies a week kicks in, most or all carriers are expected to be online, Peltier said.
One insurer, Security First of Ormond Beach, said through a spokeswoman it would not be ready to participate in the clearinghouse by early January as it concentrates on other initiatives.
The clearinghouse list is dominated by Florida-based insurers. Not on it: such national brandnames as State Farm and Allstate, who have been dropping property customers or writing little new business in Florida.
Heritage gave $110,000 to Scott’s Let’s Get to Work committee in March. In May, a minority of a divided Citizens board approved a controversial deal 3-2 to give up to $52 million to Heritage to take up to 60,000 customers. Citizens executives called it a bold and innovative way to transfer risk, and said the money was necessary to help with expenses including reinsurance close to the start of hurricane season.
Heritage officials said they were offering many Citizens customers a better deal, but acknowledged the money could be spent on, among other things, salaries. Heritage President Richard Widdicombe did not respond to a request for comment Monday.
Heritage received about $44 million in premiums to cover the unused portions of annual policies of transferring customers. In addition, Heritage got something most insurers don’t get in takeout deals: $33 million in what officials called a “quota share” agreement to cover expenses and risks near hurricane season, Peltier said. During that time, Heritage paid $2.4 million in claims, so its net on the deal was about $30 million, he said.
Whatever the final amount, one board member called it a “bonus” not generally available to others and questioned the hurry in May. The deal bypassed the board’s normal committee procedures. Then-state Rep. Mike Fasano, R-New Port Richey, called it “blatant corporate welfare.”
At the time, Scott’s chief of staff dismissed as “outrageous” any suggestion the contribution was related to favorable treatment, though he chided Citizens for being “tone deaf” in its handling of the deal. Scott spokesman John Tupps said Monday, “The Citizens clearinghouse program will be made up of companies who voluntarily enroll. To date, Citizens says there are 17 companies enrolled.”
Florida House Speaker Will Weatherford expressed “serious concerns” in May and called for scrutiny of laws governing Citizens, as did Senate leadership, though there has been little mention of the Heritage deal in fall committee meetings.
“Nobody was serious,” said former state Sen. Dan Gelber, a Miami Beach Democrat whose call for Scott to return the contribution went unheeded. “Because there’s a Republican governor, there’s been radio silence.”
In November and December, hundreds of thousands of Citizens customers are considering offers to switch coverage to private insurers, though they have the option to stay with Citizens. They will not have the option to stay if a private insurer is awarded their business in the clearinghouse.
Citizens, Florida’s largest property insurer, has shrunk from 1.5 million to 1.2 million customers in about a year, and could fall below 1 million by early in 2014 through the transfer offers and the arrival of the clearinghouse. It remains the largest insurer in Palm Beach County with about 125,000 customers.
Self-identified insurance interests have given more than $1.6 million to the Let’s Get to Work committee. That does not include contributions from groups that advocate for, among other things, legislative and regulatory changes sought by insurance lobbyists.
Associated Industries of Florida, which has publicly pressed for measures to shrink Citizens, gave $25,000 last Wednesday. The Florida Chamber of Commerce, which hosts an annual insurance summit, has given more than $628,000 since 2010, including a $350,000 donation Nov. 5.
As of Jan. 2, the following four private insurers will have the first opportunity to gain customers ruled ineligible for state-run Citizens under a new clearinghouse.
Florida Peninsula…..141,564…..$311 million
United Property & Casualty…..142,310…..$266 million
Heritage Property & Casualty…..91,820…..$167 million
Safe Harbor (Cabrillo)…..48,985…..$47 million
Source: Citizens Property Insurance Corp.
Others insurers in the wings
Here are other insurers who have signed up for the clearinghouse designed to steer customers from state-run Citizens but won’t initially be part of it Jan. 2:
American Integrity…..160,396…..$188 million
American Traditions…..49,383…..$47 million
Ark Royal (ASI)…..81,336…..$107 million
Capitol Preferred…..43,454…..$50 million
Modern USA…..36,080…..$35 million
People’s Trust…..53,060…..$112 million
Security First…..178,252…..$230 million
Southern Fidelity Insurance…..129,456…..$188 million
Southern Oak…..62,582…..$116 million
Tower Hill Signature…..83,741…..$ 138million
Source: Citizens Property Insurance Corp.