Citizens Corp. aims to drive off customers
State-owned insurer votes to raise rates by average of 7.2%
Customers of stateowned Citizens Property Insurance Corp. should prepare to pay more to cover their homes and businesses. And customers who are new to Citizens could soon be required to pay much higher rates.
The reason: The folks who run Citizens would prefer you not be their customer anymore.
The company’s Board of Governors on Tuesday approved rate increases averaging 7.2% statewide for its residential customers. If approved by state insurance regulators, the new rates will take effect on Aug. 1 for renewing customers.
In Broward County, single-family homeowners who renew their Citizens policies will see their average premiums to insure a single-family house will increase by $231 — from $3,472 to $3,703. That’s a 6.6% hike.
Palm Beach County homeowners will pay an average of $248 more — from $3,034 to $3,282, an 8.2% increase. Miami-Dade County homeowners will pay an average of $181 more — from $3,882 to $3,701.
That county’s average increase is smaller because the number of lawsuits against Citizens have decreased over the past year, thanks to various reforms. Most lawsuits against Citizens are filed from MiamiDade, and consumers there have borne the largest rate increases over the past several years as litigation against the company increased.
Condo and wind-only customers will see increases as well, but they won’t be as much dollar-wise because costs of those policies are significantly lower than for full-house coverage.
A majority of Citizens’
customers — more than 285,000 — live in Broward, Palm Beach or Miami-Dade counties.
In December, Citizens’ governing board directed company staff members to find ways to make the rate hikes even higher than the 3.7% average hike originally proposed for residential customers.
Then, newly installed chairman Carlos Beruff voiced concerns that a state law limiting Citizens from raising consumers’ rates more than 10% a year has, over time, made the company too attractive compared to private-market companies.
And that’s the last condition that state officials want to see Citizens create in Florida’s insurance marketplace.
“Our objective is to create a healthy, free insurance market in Florida and ultimately make us the insurer of last resort,” Beruff said Tuesday.
Private market companies, unrestrained by a rate cap, have been forced by spiraling litigation and claims from 2017’s Hurricane Irma to increase their rates to levels that have left many unable to compete with Citizens.
In South Florida, most consumers could reduce their insurance costs by an average of 21% by switching to Citizens, according to data presented in the December meeting.
Citizens was never meant to be competitive. It was created out of the need to keep Florida residents insured after multiple hurricanes caused private market companies to withdraw from the state,
Under state law, customers can buy a Citizens policy only if they cannot otherwise find a private-market insurer willing to cover them, or if the only available options are priced more than 15% above what consumers would pay with Citizens.
The company was actually meant to be less attractive to consumers by providing less coverage at higher rates. In addition, Citizens customers are uniquely vulnerable to a special assessment of up to 45% of their annual premium if claims after a catastrophic storm season wipe out the company’s $6 billion surplus.
All insurance customers in Florida are subject to special assessments if Citizens is unable to pay its claims. The likelihood of that happening would increase if Citizens’ customer base swelled from the current 552,000 to 700,000 as projected by the end of 2021 and rates were allowed to remain low, CEO Barry Gilway said in December.
After the December meeting, Citizens’ staff members made three technical adjustments to its rate setting methodology that justified the larger increase requested by Beruff and the board. One adjustment involved diverting income to the company’s surplus. Another was to eliminate the possibility of decreasing rates for customers that would have otherwise deserved them. For the upcoming year, 25,835 residential customers would have gotten rate decreases, including 15,902 in the tricounty region. Instead, they’ll at least be spared from increases.
The third adjustment was to base estimates of likely hurricane damage costs on computer models that project costlier destruction.
Citizens’ chief actuary Brian Donavan said all of the adjustments were sound and standard practices. All were reviewed by state insurance regulators, Citizens spokesman Michael Peltier said after the meeting.
While the 10% cap on annual rate increases would remain in place unless changed by the state Legislature, the board also approved a bid to remove the cap for new customers. If approved by state insurance regulators, new customers would be charged higher rates closer to those charged by private-market companies.
Several property owners from the Florida Keys objected, saying that would create a huge burden in Monroe County, where Citizens’ prices are highest and only 30% of policies are with private-market insurers. Landlords would pass along increases to renters and many will be unable to afford to live in the Keys, said Suzanne Moore, president of the Key West Chamber of Commerce.
“This will have a detrimental effect on our local economy,” she said.
Even with the 10% cap in place, 667 homeowners will see rates jump by an average of $308 — from $3,702 to $4,010. Wind-only coverage for 7,381 customers would increase an average of $291 — from $3,5412 to $3,832.
Sympathizing with Keys customers, the board voted to ask state insurance regulators if Monroe County could be exempted from the effort to eliminate the 10% cap for new customers.