Citizens Insurance proposes rate hikes
After 6-month delay, company hinting at even higher rates than originally suggested
Citizens Insurance rates are poised to rise even higher than the company proposed in June — despite a six-month delay meant to give the company time to figure out how to protect its customers.
The 2019 rate proposal would raise homeowner insurance rates an average of 8.1. percent statewide.
That’s higher than the 7.9 percent statewide hike that Citizens’ Board of Governors was set to vote on in late June before state Chief Financial Officer Jimmy Patronis sent letters to each of the board members convincing them to go along with a sixmonth delay.
The new proposal, set for a Wednesday vote, includes significant cost increases for customers compared to the June proposal.
If the new recommendations are approved, average premium increases for multiperil singlefamily homeowner coverage will be higher in 53 counties compared to the June proposals, while the statewide average premium will be $43 higher — or $2,851 — than proposed in June.
In addition, homeowners with wind-only coverage from the state-run Citizens Property Insurance Corp. would pay 8.4 percent more on average for that coverage compared to the 7.9 percent increase recommended in June.
Condominium owners with multiperil coverage would pay an average 8.3 percent more compared to the 7.9 percent increase
recommended in June.
And condo owners with wind-only coverage from Citizens would pay an average 8.0 percent more compared to the 7.2 percent increase recommended in June.
In South Florida, where 51 percent of Citizens’ policyholders are based, already steep premiums would increase even more than projected in June.
In Broward County, 29,215 multiperil residential policyholders would see rates increased an average 9.9 percent, while premiums would jump to an average $3,360 — $66 more than the $3,294 in the June recommendations.
Miami-Dade County, where 55,279 houses have multiperil insurance, rates would increase an average 9.4 percent and premiums would jump to $4,033 — $88 more than the $3,945 projected in June.
Palm Beach County’s 10,725 multiperil residential policies would be hit with 7.0 percent average rate increases, bringing average premiums up to $3,105 — $53 more than projected in June.
Judging by his letter, these increases are not what Patronis was hoping would result from the rate-hike delay.
The letter urged Citizens to find a solution to “skyrocketing non-weather water losses” and accompanying fraud and excessive litigation in Miami-Dade, Broward, and Palm Beach counties that Citizens has for several years blamed for steep annual increases.
Patronis asked the board to review impacts of recently enacted reforms aimed at limiting non-weather water loss claims and “come up with better solutions to address the true cause of this to avoid rate increases and protect policyholders.”
“We must find the solution to the underlying problem and not pass on this cost to policyholders,” the letter said.
Board members acquiesced and voted to delay their vote on the proposed rate increases.
Asked on Friday for Patronis’ reaction to the new rate proposals, Anna Alexopoulos Farrar, communications director for the Department of Financial Services, responded:
“The CFO is concerned that Citizens was incapable of coming up with solutions to address non-weather water losses and litigation that are clearly driving up rates. … We can’t solve this with a blanket answer. It’s important that Florida insurance policyholders are protected from the few bad actors who want to game the system.”
In the upcoming legislative session, lawmakers are expected to take yet another stab — after six previous failed attempts — to enact laws to remove financial incentives for water restoration contractors and plaintiffs attorneys to sue insurers.
What no one said in June was that the sixmonth delay would have little impact on what Citizens would recommend its board approve, even if the reforms that took effect over the summer result in decreased non-weather water losses, litigation and fraud — as they are projected to do.
That’s because state law sets a 10 percent limit on annual rate increases the company is allowed to impose, but actual loss trends indicate the company should be raising rates significantly more than 10 percent to achieve a balance known as “actuarial soundness,” the company said in its explanation for the rates.
So even factoring in expectations for decreased costs from non-weather water claims still results in an “indicated” need for increases above the 10 percent cap.
Another factor that prevented the delay from resulting in sharply lower rates is that rate projections are based on claims and revenue data stretching back five years, Citizens spokesman Michael Peltier said. Many of the differences between the June and December projections result from the data used in the December projections being six months newer, reflecting higher costs and driving need for higher rates, he said.