Citizens Insurance considers rate hikes

Company wants to make itself a less attactive option after a rapid increase in policy count

The folks who run Citizens Property Insurance Corp. probably don’t want you to hear this, but you can save up to 39% off your insurance bill if you switch from your current home insurer to the stateowned “insurer of last resort.”

But you’d better hurry and call your agent. Citizens wants to raise its rates to make it a less attractive option.

Alarmed by rapid increases in the company’s policy count, members of Citizens’ Board of Governors on Wednesday declared their intention to move aggressively to get smaller. That means finding ways to charge more money so fewer consumers will be eligible to buy insurance from Citizens.

Currently, customers can sign on with Citizens 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 they would pay with Citizens.

With private-market insurers’ prices skyrocketing, homeowners are finding Citizens rates that average 21% lower than private market insurers in the tricounty region, qualifying them to make the switch, company officials said at Wednesday’s meeting. Most South Florida consumers could reduce their insurance costs by 10% to 29% by switching to Citizens, according to data presented at the meeting. Some in MiamiDade County would pay 39% less, the data shows.

Citizens has added about 100,000 new customers over the past year, growing to 532,000 policies. About half of Citizens’ policies insure South Florida homes and businesses.

Newly installed board chairman Carlos Beruff opened the meeting by voicing alarm at projections that the company could grow to 700,000 policies by the end of 2021.

If Citizens grows to 700,000 policies and two major storms strike coastal urban areas — such as South Florida or the Tampa region — within two or three years, Florida residents would be forced to help the company pay customers’ claims.

Under a scenario described by president and CEO Barry Gilway, Citizens could see its current $6 billion surplus evaporate after the first storm, and then levy special assessments on all property insurance customers in Florida to cover a $6 billion shortfall after the second storm.

“Citizens has become directly competitive with the private sector and in doing so has become a tax on all other consumers in the state,” board member James Holton said.

Citizens’ prices are artificially low, Beruff said. That’s because state law bars the company from raising rates more than 10% a year on any renewing policy. Mean

while, private market companies, with no restrictions, have been forced to raise their customers’ rates between 12% and 47% this year alone.

New policies are priced at the same capped rate offered to renewing customers, making Citizens a cheaper option than 91% of policies available on the private market, Gilway said.

At a meeting of the company’s Actuarial & Underwriting Committee on Tuesday, chairman Beruff criticized a recommendation by CItizens staff members to increase rates by an average of just 3.7% for 2021 policies renewing on or after Aug. 1.

On Wednesday, the eight-member Board of Governors agreed unanimously with Beruff’s call to delay voting on the 3.7% rate increase and work with the state Office of Insurance Regulation to find a way, despite the 10% cap, to raise rates to levels comparable to what private market companies are charging.

But the board deadlocked 4-4 on whether to endorse a recent recommendation by state Sen. Jeff Brandes, a Tampa-area Republican, to stop charging new customers the same capped rate available to renewing customers. Board members who voted against the proposal voiced various objections, with some saying they were concerned about neighbors being charged different prices. Others said the proposal should be considered as part of the larger package of price reforms that will be sought in coming weeks.

A study by Florida State University’s College of Business, commissioned by Citizens to identify ways to improve Florida’s insurance market, said modifying or eliminating the 10% cap on yearly rate increases could help boost Citizens’ rates higher than private market companies, enabling Citizens to again become an insurer of last resort.

Beruff, a Manatee County real estate developer who was appointed as board chairman a month ago by state CEO Jimmy Patronis, called for a special board meeting on Jan. 26 to discuss what state regulators will approve. If regulators won’t allow rates to be increased enough, the board should push for reforms during the upcoming legislative session, Beruff said.

Part of the effort would involve enticing private market companies to resume “taking out” Citizens policies. Early in the decade, the company pursued an aggressive depopulation program that included paying companies to assume large chunks of policies. The program helped reduce Citizens’ policy count from its peak of 1.5 million in 2012 to 430,000 later in the decade.

But with private-market companies reeling from losses driven by recent storm claims, fraud and increased litigation, the depopulation program has come to a “screeching halt,” Gilway said.

As a whole, private-market insurers have been unprofitable since 2016, Gilway said. For the first nine months of 2020, five of the largest of those companies reported $727 million in combined net losses, Gilway said, citing industry data.

If reforms are enacted in the spring legislative session, Citizens’ policy count could stop increasing within about a year, officials said.