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Citizens Insurance Could Drop 7.5% of Its Policies on Aug. 15

The Fla.-owned insurer wrote to customers who haven’t made payments due to COVID-19 that they must pay all money owed by Aug. 15 or face cancellation.

TALLAHASSEE, Fla. – Florida’s state-run insurer of last resort says it’s time to pay up.

Citizens Property Insurance Corp. customers who have been unable to make their homeowner insurance payments because of a COVID-19-related hardship will have to come up with a way to fulfill their obligations or face cancellation after Aug. 15, the company said in letters sent to agents and customers this month.

As of July 17, 13,063 Citizens customers – about 7.5% of the company’s 481,000 policies – were past due, according to the company. They include 8,107 whose policies were renewed with no down payment since March, leaving customers owing hundreds if not thousands of past-due dollars.

Some agents worry that continued high rates of unemployment will prevent many of those homeowners from resuming making payments next month, causing them to lose their insurance just as the worst part of the hurricane season approaches.

Homeowners with mortgages would then face having their lender force-place an insurance policy, a more costly option which would increase the debt and possibly lead to foreclosure. Homeowners without mortgages would bear the cost of their own repairs – if they could afford it.

Making matters worse, the resumption of cancellations and nonrenewals comes amid skyrocketing renewal rates – a result of heightened hurricane activity, claims fraud and rising costs for insurance that insurers must buy.

“Payments have been deferred and people are still not working. How are they going to pay?” asks Dulce Suarez-Resnick, vice president of NCF Insurance Associates in Miami. “We all thought this pandemic was going to last two or three months. But it’s been much longer and we don’t know when it’s going to end.”

On March 27, at the urging of Florida’s Office of Insurance Regulation, Citizens stopped processing policy cancellations and nonrenewals and offered to reinstate coverage for policies that had been cancelled or nonrenewed since March 1.

It’s not known how many customers of other insurance companies are in similar situations. Most companies did not follow Citizens’ lead by suspending cancellations and nonrenewals across the board. Instead, they required their customers to contact them individually and make arrangements on a case-by-case basis.

Jeff Grady, president and CEO of the Florida Association of Insurance Commissioners, says he’s been pleasantly surprised by how insurers have been willing to work with customers who have asked for help.

“It’s remarkable how many insurers volunteered to make midterm adjustments,” he said.

Citizens customers with mortgage loans are unlikely to be in arrears with the insurer. That’s because their insurance payments are rolled into their escrow accounts and paid by their mortgage servicers.

Under pandemic relief laws enacted by the federal government in March, about 70% of mortgage borrowers were allowed to temporarily stop making their mortgage payments if pandemic affected their income. In those cases, their mortgage servicers were required to continue paying taxes and insurance on the borrowers’ behalf.

Those missed payments will be made up, along with the missed mortgage payments, over time after customers resume making payments or get those missed payments added to the end of their loans.

Customers who own their homes outright and pay their insurance directly to Citizens are more likely to face trouble bringing those payments back to current status, Suarez-Resnick said. Many might have paid 40% at the beginning of their current term and now have missed two payments of 20% each. If they have South Florida’s average $3,500 policy, they could be $1,750 past due, she said.

According to resumption terms outlined in the advisory Citizens sent to agents and customers last week, past-due customers who cannot make a lump-sum repayment will be allowed to spread their past due amount equally over the remaining months of their current term.

Whatever they decide, they must either make a payment or contact Citizens to make payment arrangements by Aug. 14. Cancellations, Suarez-Resnick said, can be processed in 12 days, which would leave affected homeowners unprotected before Labor Day weekend, near the peak of hurricane season.

Citizens spokesman Michael Peltier said the decision to end the moratorium was not related to the beginning of hurricane season.

Citizens customers requiring payment arrangements are asked to call its customer care center at 866-411-2742 or email by Aug. 14.

© 2020 the Sun Sentinel (Fort Lauderdale, Fla.). Distributed by Tribune Content Agency, LLC.

Topics: insurance/property insurance