Citizens Not Budging On Plan To Purge Many Policyholders

MIAMI (CBS4) - Florida legislators created Citizens Insurance a decade ago to take on homes other insurance companies wouldn't touch. They became the largest insurer of homes in Florida and now the company is trying to change that.

In an effort to shed customers, many options are on the table including becoming the most expensive insurer in the state. Already though, policy holders are dropping Citizens, including Lidia Schwartzbaum.

Last year, she paid almost $4,500 to insure her Miami Beach home with Citizens. And this year?

"They want to raise it to $9,979 dollars," Schwartzbaum told CBS4's David Sutta.

Schwartzbaum is fuming from a recent re-inspection by Florida's government-run insurance program.

"He is claiming that my roof is not attached as well," Schwartzbaum.

By the time the inspection was done, many of her hurricane credits were wiped out. She said her new premium would wipe her out too.

"I laughed. I said this is it. I'm not going with home owner insurance anymore," she said.

"It's not an increase. It's an adjustment on what kind of home that you own," Tom Grady, Citizens interim CEO explained to CBS4 Monday as Citizens was rolling out a major correction.

"We grew so fast after the storms of 2005 and 2006 that we just took properties and didn't have time to understand what the properties were," Grady said. "We are finding on our re-inspections that we thought you had a sedan, but in fact you have a Ferrari. Translating that into homes we thought you had a hurricane hardened home and you don't."

Even so, many ask why is Citizens, a non-profit, suddenly on a money grab. The company is in the best financial shape of it's life.

"For many years we were not hit in Dade county with any hurricanes. Where is that money now? Where is that money," Schwartzbaum asked.

As it turns out, Citizens is trying to wipe out half of it's customer base. According to Citizens, they insure about $500 billion dollars worth of property and have roughly $6 billion in the bank. A catastrophic storm is estimated to cost $22 billion dollars. In other words Citizens piggy bank could be wiped out quickly.

Grady explained "Put it all together and it's simple math. We need to continue to grow surplus and we can't do that if prices today are low."

Since 2007, under a legislative bill, citizens has been forced to be affordable. It means premiums are kept low but after a storm, Citizen policy owners, and eventually all homeowners statewide, will be hit with an assessment.

"If you are just looking at the number for today it may look like a pretty good deal. If you are looking at today and tomorrow, maybe not," Grady said.

The thought Grady has is to stop the practice of handing out assessments after a big storm. They are also considering becoming the most expensive insurer in the state by modeling the company after the Citizens program in Louisiana.

There the expense of insurance has truly made the program the insurer of last resort. Citizens will submit their plans in August.