Citizens board approves hike in property insurance costs
Rate increase of an average of 8.2 percent to take effect Sept. 1
Citing continued high numbers of lawsuits, Citizens Property Insurance Corp.’s governing board approved rate increases for 97 percent of its Florida policyholders next year.
The recommended increase, averaging 8.2 percent across all of the company’s insurance lines, will take effect Sept. 1 if approved by the state Office of Insurance Regulation, which has final say.
Citizens’ board of governors voted 8-1 for the rate increase, with Bette Brown as the lone dissenter.
Homeowners in Broward and Miami-Dade counties will, for a third straight year, see among the largest increases: 9.9 percent in Broward County, 9.4 percent in Miami-Dade, and 7.0 percent in Palm Beach County.
In recommending the rate hikes, Citizens’ officials blamed continued high levels of lawsuits by a small number of plaintiffs attorneys, mostly from South Florida.
The issue is known as Assignment of Benefits, or AOB, named after an affidavit that water repair contractors convince homeowners to sign, giving the contractors the right to stand in the policyholder’s shoes when
billing insurers.
Insurers contend contractors armed with AOBs abuse insurers through excessive billing, then enlist plaintiffs attorneys who are quick to file suit when insurers balk at paying the invoices.
Attorneys and contractors, by contrast, say insurers too often fail to offer fair claims settlements and must be sued.
But while lawsuits over non-weather-related water claims have stabilized in South Florida over the past two years, they have increased in many other counties throughout the state, said Barry Gilway, Citizens president and CEO.
For example, in Polk County, lawsuits against Citizens increased from 326 in 2014 to 955 during the first nine months of 2018, Gilway said.
Gilway urged the board to approve increases for another reason. Private market insurers, also battling increased litigation, have been increasing rates as well. Many companies must now charge premiums higher than customers can get from state-run Citizens, the so-called insurer of last resort.
That makes the company more attractive to homeowners, particularly in high-cost, high-risk areas such as South Florida.
Citizens was originally created to ensure all homeowners could buy insurance
where private market companies refused to do business.
When the number of Citizens policies has grown too large, as earlier in the decade when it neared 1.5 million, state lawmakers have approved aggressive depopulation strategies to encourage private companies to take over as much business as possible.
“We need a rate increase in order to retain rate differential with the private market and not repopulate,” Gilway said.
Gilway again called for the state legislature to enact reforms intended to dissuade plaintiffs attorneys from filing large numbers of suits against the company.
His suggestions include making it harder for attorneys to collect legal fees when insurers agree to settle suits for more than originally offered, and requiring state licensing of all water restoration contractors.
Board members echoed Gilway’s call for reforms, saying they felt confident lawmakers will finally act
following six years that lawmakers loyal to plaintiffs attorneys blocked legislation pushed by the insurance industry.
Board members said they regretted having to again increase Citizens rates.
“It’s just a shame that raising rates is going to pose more of an AOB and litigation issue,” Brown said.
Said Marc Dunbar, “The logical response is for policyholders to contact their legislators and let them know we have to have AOB reforms next year.”