WHAT THE HECK IS AN “ASSUMPTION”?
American Integrity has assumed many policies from Citizens over the years and one thing we’ve learned is that it can be a confusing process…especially for Florida homeowners. So, here is our “Assumptions 101” guide!
CITIZENS ASSUMPTIONS 101
FIRST, WHAT IS AN ASSUMPTION?
Sometimes it’s referred to as a “take out” or “depopulation” or an “assumption”, but all terms refer to the same thing…when current customers of Florida’s state run company, Citizens, are selected by a private insurance company and given the chance to switch their policy to that private company.
WHAT IS CITIZENS? WHY DOES IT EXIST?
Every state in the union has a government run or Joint Underwriting Association insurance entity to make sure everyone can get coverage even if no private carrier will insure them. Florida’s insuring entity for this purpose is called: Citizens Property Insurance Corporation (Citizens).
WHY IS IT DIFFICULT FOR SOME PEOPLE TO FIND PROPERTY INSURANCE?
It really boils down to the fact that the property is “high risk”. Insurance companies don’t want to insure homes that are in catastrophe prone areas or which characteristics make it hazardous. Some homes have an attribute (maybe the age, location, or construction) that makes it, statistically, more risky. After several hurricanes hit Florida in 2004 many companies pulled out of the state and others limited renewals plus where they wrote new business. As a result, the number of customers that had to be with Citizens grew tremendously.
IS THAT GOOD?
Well, our state company, Citizens, insures more property than any other state in the Union. That’s not so good for us. Citizens is funded first by its policyholders’ premiums, but it also has the power to assess (add a fee/charge) to all residents of Florida (not just Citizens customers) in the event a major catastrophe depletes their funds. Nobody wants this to happen, so the smaller Citizens is, the better it is for all of us. Citizens wants private companies to consider “assuming” some of the policies or homes which the private company feels it can provide the coverage needed at the appropriate market rate. The State of Florida wants to get the properties that are eligible out of the state company and covered by the private companies. That’s where assumptions come in.
WHY WOULD A PRIVATE INSURANCE COMPANY TAKE ON PROPERTIES WHICH MAY HAVE MORE RISK INVOLVED?
When a private company agrees to help remove/assume policies from Citizens they are able to view the details (age, location, construction, etc.) at one time and use this data to see if the policies could be profitable as a group (something they can’t do when only looking at each risk one at a time). If the company thinks the bundle of policies (sometimes thousands or tens of thousands) could be profitable they agree to “assume” the policies.
HOW DOES THE ASSUMPTION WORK?
The actual process and rules sometimes change, but most of the time an assumption follows this pattern…
- A private insurance company will select the policies they would like to offer coverage and send those homeowners a letter asking them to make a decision
- If the policyholders would like to accept the offer for coverage with the new company, they agree to the assumption by not rejecting the offer. If they decide to STAY with Citizens, they must proactively act and send in a rejection form.
- If the policyholder accepts the offer, or does nothing, their coverage will switch to the private insurer on the assumption renewal date, however the new carrier begins to assume responsibility for any claims on those policies, as of the specified assumption date.
- The policyholder continues to call Citizens for regular policy service (like address changes) until the private insurer sends them a new policy 60 days prior to their renewal.
WHY WOULD SOMEONE REJECT THE OFFER TO MOVE THEIR POLICY TO THE PRIVATE INSURANCE COMPANY?
There are a variety of reasons why someone might reject an offer from a private insurance company. First, almost always, the price will change when moving to a private company. Private companies protect themselves and their customers from a catastrophe by purchasing reinsurance coverage (which is expensive) while Citizens can finance themselves through increased taxes. Second, the policyholder might not be familiar with the private company and may be worried about changing. Last, they might not fully understand the concept of an assumption.
WHERE CAN I GO TO FIND OUT MORE ABOUT AN INSURANCE COMPANY OFFERING THIS?
First, check out the company’s web site. Some companies, American Integrity included, will share their financial information, like their balance sheet and income statement, as well as their reinsurance information. This is the sign of a company that doesn’t have anything to hide! You can also look up the company on the Florida Office of Insurance Regulation web site. You can research the company’s financial stability rating by Demotech, Inc, a leading indicator of the financial stability of Property and Casualty insurers. Last, you can even check to see if the company has a rating with the Better Business Bureau.
SHOULD I ACCEPT AN OFFER FROM A PRIVATE INSURANCE COMPANY IF MY POLICY IS “ASSUMED”?
That’s not an easy question and there aren’t easy answers. As a taxpayer, you want Citizens to cover as few homes as possible. As a homeowner, you want the best coverage at the least expensive price. A private company may cost more, but offer more options. It may provide better service. And it helps the taxpayers! So, discussing this with your agent and researching the company makes sense.