Florida Insurance Crisis? a good thing if you are the head of Citizens...

TALLAHASSEE, FL - In what could be considered as a slap in the face to Florida taxpayers, an investigation by the Sun Sentinel revealed that the head of the state-run Citizens Property insurance Corp., Mr. Scott Wallace was paid a base wage of $343,608 in 2009, making him one of Florida’s top-paid government employees. It gets better, 48 other Citizens employees earned more than $100,000 during the same period.

Florida has been undergoing an insurance crisis for several years. Things are getting worse, not better for its residents. In an extortionate move, State Farm recently threatened to pull out unless they were granted an unduly large increase in rates. Many of these insurance companies operate separate Florida subsidiaries with paper losses while the national parent companies make unordinary profits. Believe it or not, this is a legal practice in a state long known for two things: sun and widespread ineptitude and corruption in its legislature.

According to a study conducted in collaboration with the James Madison Institute, the Competitive Enterprise Institute and Heartland Institute, Florida got an ‘F’ grade on a national insurance report card based on an analysis outlining the state’s insurance ills. The state earned the dismal rating – the lowest possible – after the national study compared the insurance environments in all 50 states and the District of Columbia. Only four other states fared as bad.

The study indicated that insurance reforms passed in 2007 failed to achieve lasting rate reductions for property owners and caused massive liabilities for taxpayers. Additionally, the reforms caused many private insurers to reduce or eliminate their Florida exposure.

TALLAHASSEE, Fla. – March 2, 2010 – Citizens Property Insurance Corp. Executive Director Scott Wallace was one of Florida’s top-paid government employees last year and 48 other Citizens employees earned more than $100,000, a Sun Sentinel analysis shows.

Federal labor statistics indicate Citizens’ executive wages are much lower than those of some national private insurers. And Citizens is a nonprofit, tax-exempt government entity – not a traditional state agency – so its employees don’t receive generous health and retirement benefits.

But the insurers’ finances have come under increasing scrutiny because almost all Florida homeowners pay to fund Citizens, which the state created as a last-resort property insurer.

Florida homeowners pay a 1.4 percent fee on private insurance premiums to cover the Citizens’ shortfalls after the 2005 hurricane season. If a hurricane strikes and causes major damage, all automobile and property insurance policyholders could also end up paying to keep the insurer afloat.

Concerned about growing claims costs for Citizens and other insurers, legislators have introduced bills aimed at reducing inflated or fraudulent claims. But the insurer’s overhead and payroll costs have also swelled in recent years even as it trimmed its policies from a peak of 1.4 million policies in October 2007 to just more than 1 million now.

Some Citizens policyholders have expressed concerns about the insurer’s spending in light of a law passed last year allowing premium increases of as much as 10 percent a year for the first time since 2007, when the Legislature froze Citizens’ rates.

Christine Turner Ashburn, a spokeswoman for Citizens, said the company must pay competitive wages in order to operate in the same way as a private insurer.

“We’re not a private insurance company, but we do have core functions where we have to operate as one” such as handling claims, issuing policies and tracking data, Turner Ashburn said.

A Sun Sentinel review of Citizens’ salary data found:

Wallace was paid a base wage of $343,608 in 2009. By comparison, the Department of Financial Services reports the top two highest paid employees of 34 state agencies earned salaries of $379,000 and $309,600 in 2009. But the department’s data don’t include state entities such as the State Board of Administration and universities. University athletic coaches can earn hundreds of thousands of dollars in performance bonuses alone.

Forty-nine employees earned more than $100,000 last year; six received moving expenses ranging from $1,241 to $52,414; and 657 received overtime ranging from 84 cents to $23,920.

About 107 Citizens executives and managers – including some first-line managers – earned $84,000 on average last year. On average, management officials nationwide at insurance companies earned $117,400, according to the Bureau of Labor Statistics’ data on the annual wages of employees of insurance carriers, not including life, health and medical companies.

Turner Ashburn said employees of the state-run insurer aren’t compensated in the same way as state employees who receive full health and retirement benefits packages. “It’s important to delineate that we’re not guaranteed benefits that state employees get,” she said.

She said the state agency that is most comparable to Citizens is the State Board of Administration, which manages the state’s pension fund and other state and local government funds, and pays its executive director $325,000 a year.

Turner Ashburn also said that the company can’t attract employees by offering many of the bonuses and perks private insurers provide. For instance, Wallace was hired in 2006 after working as executive vice president at a subsidiary of W. R. Berkley Corp., a major insurance holding company, where he earned a base salary of about $250,000 but also received additional bonuses and stock options, she said.

His Citizens wages are higher than the $188,310 average pay in 2008 for chief executives of insurance companies, not including life, health and medical companies, according to the labor bureau data.

But he earned much less than some of his counterparts at large national companies. Allstate Corp. Chairman Tom Wilson, for instance, earned a total compensation of $8.3 million in 2009, including a $1 million salary and much of the rest in future earnings. Ed Rust Jr., the chairman of State Farm, earned more than $9 million in 2009.

Source: Florida Association of Realtors

About Citizens

Citizens is a not-for-profit, tax-exempt government corporation whose public purpose is to provide insurance protection to Florida property owners throughout the state. The corporation insures hundreds of thousands of homes, businesses and condominiums whose owners otherwise might not be able to find coverage.

Citizens operates according to statutory requirements created by the Florida Legislature and a Plan of Operation approved by the Florida Financial Services Commission. The corporation is governed by a Board of Governors that administers its Plan of Operation. Florida's Governor, President of the Florida Senate, Speaker of the Florida House and the state's Chief Financial Officer each appoint two members to the Board.

Citizens has offices in Tallahassee, Jacksonville and Tampa. Tallahassee is the corporate headquarters for the organization. The Jacksonville and Tampa offices provide policy services and underwriting, claims, and customer support.