Should Florida Homeowners Opt Out of Automatic Transfer from Citizens to a Take Out Insurer?

If you have your homeowners insurance through Citizens Property Insurance Company, Florida’s quasi-public insurer of last resort, you might have many complaints.  Many Citizens policyholders are less than ecstatic with the level of service and coverage provided by Citizens.  This dissatisfaction might motivate policyholders who have received an offer to switch to a “take out” insurance company to accept such an offer.  Unfortunately, this decision might amount to jumping out of the frying pan and into the fire.

During recent months, many Citizens policyholders have received notices indicating that they will be automatically shifted to coverage with a “take out” company.  This term refers to a small start-up insurance carrier that has been created expressly to take on customers of Citizens.  However, these insurers have significant disadvantages because their exclusive source of new customers involves accounts being transferred from Citizens. 

The shifting of policies from Citizens to the take out companies benefits both insurance carriers.  Citizens benefits because it is trying to reduce its customer base.  The quasi-public insurer appears to be offloading a disproportionate number of policyholders in high risk areas to positively affect the amount of risk in Citizens’ client base.  The take out insurers benefit because they have a built in source of business that does not require any investment in marketing.

However, this transfer of policies can be a disaster for the policyholder.  These freshly created insurance companies have no proven track record of absorbing and paying claims following major disasters like hurricanes.  Further, insurance industry ratings for these take out companies do not provide a reason for consumers to be optimistic about the ability of these insurers to cover a high volume of claims in such a situation.  Collectively, these take out insurers average a C- rating from Weiss Ratings. 

These low ratings are even more concerning because 11 of these insurance companies have failed since 2006 despite the fact there has been no major event resulting in catastrophic losses to a high volume of policyholders for over 10 years.  This is hardly surprising given that 19 of the 48 Florida take out insurers received a D- rating in the Weiss Ratings.

Although many Florida homeowners are less than thrilled with Citizens, they might want to consider opting out of the automatic transfer from Citizens to a potentially unproven start-up insurance company.  The ability of Citizens to handle paying a high volume of claims following a hurricane or similar disaster is far greater than a small take out insurer.  While you might still have to fight to obtain the compensation for your loss from Citizens, you do not have to worry about whether this quasi-public insurer will have sufficient funds to cover all of the losses following such a catastrophic event.

If you are struggling to get your insurance company to admit coverage or pay your claim for property damage, you should seek the expertise of an experienced Miami insurance claims attorney.  My law firm represents policyholders in claims disputes in Miami and throughout Florida.  The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations.  No Recovery, No Lawyer Fees.  Call 305-461-1095 or Toll Free 1-866-71-CLAIM.

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