Citizens Insurance Board Weighs Higher Rates

April 26, 2012

Homeowners who join the state-backed insurance pool after January 1 could see rates more than 10 percent higher than current premiums under a proposal up for debate Thursday by Citizens Property Insurance Corp.’s governing board.

Existing Citizens policyholders are protected from large rate bumps by a statutory 10 percent cap on premium increases – and will continue to be. Under the proposal to be considered Thursday, new policyholders could be charged initial rates far more than similar customers who have already been in the pool.

Going forward, however, all customers would be protected by the 10 percent limit in effect for the company’s nearly 1.5 million current policies.

Struggling with actuarially unsound rates and political pressure to winnow its number of policy holders to bolster private competition, Citizens’ board members say new policies aren’t subject to the 10 percent limit on increasing premiums precisely because they’re new policies. Since new customers have no current premium, they aren’t protected by a limit on premium increases.

The limit on increases was meant to protect policyholders in the pool, which insures some of the riskiest properties in the state, from making insurance unaffordable.

The recommendation to remove the cap on new policies has already come under fire from consumer groups and a leading Senate critic of attempts to raise Citizens premiums. Sen. Mike Fasano, R-New Port Richey, said the company’s board of governors is trying to circumvent the Legislature, which has said it does not want Citizens’ policyholders to see their rates skyrocket. It was the Legislature that put the 10 percent cap on premium increases in the first place.

“It’s not only a sneaky move, it is deceitful. It is a travesty,” Fasano said. “I tell you, they are clueless in Tallahassee as to the impact this will have.”

But a key Senate committee chairman says higher rates, though painful, are needed to reduce the exposure of Florida taxpayers who would be on the financial hook if a major storm hit and Citizens could not pay its claims.

Sen. Garrett Richter, R-Naples and chairman of the Senate Banking and Insurance Committee, has been a long-time advocate of boosting Citizens premiums to bring them in line with the private market.

As long as Citizens has below market rates, Richter said private companies will not return and Florida taxpayers will continue to be on the hook in the event of a catastrophic storm.

“I believe that it is in the state of Florida’s interest to have Citizens rates that are adequate to pay claims,” Richter said. ”

Lawmakers in 2006 froze Citizens rates following the 2004 and 2005 hurricane seasons, which prompted a surge in claims and led some companies to leave the state, pushing more customers into Citizens. Lawmakers in 2010, under the leadership of Senate President Jeff Atwater, agreed to cap premium hikes at 10 percent, a level far below what industry officials said was necessary to bring the rates up to private competitors.

Atwater, who supported the cap, on Wednesday urged Citizens to keep premiums on new policies low as well.

“While I understand and support the efforts to facilitate the depopulation of Citizens and a return to a competitive private marketplace for Floridians, the removal of the cap for new business is beyond the scope of legislative intent,” Atwater wrote Citizens’ chairman Carlos Lacasa in a letter Wednesday.

Lawmakers earlier this year rejected major changes to Citizens, including a controversial provision to automatically shift policyholders to surplus lines companies (they could opt back into Citizens at any time.) Fasano, who led the charge against the surplus lines bill, said the board is continuing its efforts to de-populate the pool.

“This is just another way to get people out of Citizens,” Fasano said of the recommendation.

The Office of Insurance Regulation, which would have to approve any premium increase, has not received any formal filing so has not carefully considered the issue, OIR spokeswoman Amy Bogner told the News Service Wednesday.

“However, we do understand the argument that is being made regarding this situation,” Bogner said. “Our actuaries and lawyers will need to look at the specifics of any proposed rate change and also review the issue of essentially having two sets of rates — one for new policies and another for renewals.”

By The News Service of Florida

Comments

2 Responses to “Citizens Insurance Board Weighs Higher Rates”

  1. susan on April 26th, 2012 8:10 am

    Really ?? I am a Citizens customer not by Choice….. already pay them a ridiculous amount each year !!

  2. c.w. on April 26th, 2012 4:38 am

    Citizens insurance co. never should have been started. It forced sane prople to “help” the idiots that built on a sandbars, riverbanks, and places where homes were never ment to be. Shut citizens down and let the chips fall where they may.

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