Scott Johnson: A matter of fairness
Published: Wednesday, August 14, 2013 at 4:23 p.m.
Last Modified: Wednesday, August 14, 2013 at 4:23 p.m.
In a recently published column, at least one lawmaker gets it right describing the discounted rates paid by some homeowners insured in Florida's state run insurer, Citizens Property Insurance Corporation. He gets it even more right complaining about Citizens’ recent rate request of 7.7 percent, when the law was intended to authorize 10 percent.
With hardly enough detail about why raising their rates is the right thing to do, Rep. David Santiago (R-Deltona) wrote in the Orlando Sentinel, “Ending the subsidies on Citizens policyholders is a matter of fairness to the approximately 79 percent of us whose insurance is not subsidized.”
He deserves a medal, in my opinion, for going public with what far too many lawmakers, particularly those near the coast, are unwilling to admit: raising Citizens rates isn’t punishment to those receiving an unfair subsidy, it’s a pardon for those unjustly forced to pay that subsidy.
Rep. Santiago also referenced the nature of the subsidy as benefiting those “with high incomes” and those “who live out of state.”
A number of months back, I was driving down South Ocean Boulevard in Palm Beach. Secured behind twenty foot manicured hedges, electrified fences and guard gates are immense palaces disproportionately owned by non-residents–wealthy “snowbirds” and foreigners awash in some of the world’s most lavish lifestyles. Worse, many are vacation homes/playhouses, if you will, for families with names like Kennedy, Trump and Melon.
While not exclusively the province of multi-millionaires, the rest of Florida’s coastline hosts 80 percent of the state’s wealth. And, it’s where Citizens biggest subsidy exists; the Coastal Account, formerly known as the High Risk Account, provides high risk wind coverage (wind-only and multi-peril) to 384,232 homeowners with over $100 billion (with a “B”) in exposure.
Believe this, when I see the Citizens assessment on my Tallahassee homeowners policy (and my auto policy) it has a tendency to stick in the old craw. Fairness? I can’t imagine how a dishwasher at Mar-a-Lago or the upstairs maid at the Kennedy compound must feel paying assessments on their PIP premiums.
Nor is it fair that charities, religious institutions, local governments and school boards are assessed to benefit the rich. In fact, it’s downright unfair that thousands in tenement housing, or middle class citizens with modest homes have their earnings confiscated to provide bargain basement prices to those who not only don’t need it, but if asked, might willingly forfeit such unjust enrichment out of, well, “fairness!”
In 2012, 360,000 Citizens policies were issued for non-owner-occupied homes. Among those, are 192,000 owned by folks from Canada, New York and New Jersey –- 82 percent of which didn’t even need to borrow money to acquire their vacation villas.
Using the last U.S. Census, the American Consumer Institute calculated it would take the income of nearly 20 Gainesville households to equal the income of the median household on Miami’s Fisher Island. But, residents of Fisher Island with a structure less than $1 million (no land value included) qualify for subsidized premiums, and, again…a substantial majority, (60 percent) are unoccupied vacation and investment homes.
According to Citizens immediate preceding rate filing in September 2012, its rates for policies covering wind are discounted about 30 percent on a statewide aggregate basis. Why is it so hard for the Citizens board to implement a rate increase that meets the statutory cap of 10 percent statewide, instead of one at 7.7 percent?
Why would that be so hard for the Office of Insurance Regulation to approve, or the media and the demagogues to understand?
Why would anyone except the most selfish of individual complain–certainly not those on Fisher Island or South Ocean Boulevard.
The level of dispensation granted to coastal homeowners (“non-residents” and residents alike) was carefully researched and nauseatingly debated by elected officials before implementing the current annual glide path cap of 10 percent. For someone, anyone, to bestow deference beyond that 10 percent isn’t just “unfair” as Rep. Santiago pointed out…it’s unconscionable!
Scott Johnson is president & owner of Johnson Strategies, which specializes in planning, communication and advocacy for a wide range of interests focused in the property and casualty insurance field.