Citizens wants its rates to go up by double digits. Will insurance regulators agree?
Palm Beach Post-6/10/2023
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Florida insurance regulators heard arguments for a double-digit rate hike on customers of Citizens Property Insurance Corp., the state’s “insurer of last resort,” whose policies are still expected to soar through the end of the year.
The state-backed company asked Thursday for a statewide average increase of 13.1% for primary residences with multiperil policies. The average increase specific to homeowners for this type of coverage would be 12.6%, and 10.8% for condo owners.
But if you live in your Citizens-insured domicile less than nine months out of the year, your rate increase is likely to be a lot higher.
That’s because a bill passed during a special session in December allowed Citizens to raise rates for “non-primary residences” by up to 50%. The bill also said that new or renewed “non-primary” policies written after November cannot be lower than the previous year.
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One key is whether your residence is primary
“The public, I think, just needs to understand all these parts of the filing, that the end result … that there’s quite a bit of range of effect,” said Robert Lee, an actuary with the Florida Office of Insurance Regulation. “Not everybody gets 12%. Some get more, some get less. And not everybody gets 50% on the nonprimary.”
Citizens will rely on its agents to determine whether a residence is primary or non-primary. Policyholders will be notified during the renewal process.
When asked whether policyholders would be able to appeal a residence that was misclassified as non-primary, Citizens Chief Operating Officer Kelly Booten said, “We’re erring on the side of proving your primary residence.” Types of proof could include a homestead exemption, a driver’s license or a lease agreement, she said.
Citizens officials laud parts of bill passed in December
Officials with Citizens lauded some immediate impacts they saw with the passage of Senate Bill 2A, the December special session bill. It eliminated one-way attorneys fees and prevented homeowners from signing over insurance benefits to a third party, among other things.
Citizens’ projected costs were reduced by $900 million due to the bill, said Tim Cerio, the company’s president and CEO. Even so, the company has an estimated shortfall of $1.3 billion.
Citizens rates on average are 58.6% below actuarially sound levels. But, had the bill not passed, that percentage would be 88.3%.
Citizens cannot raise its rates like private insurers can. For just over a decade, state law prevented Citizens from increasing its rates by more than 10% each year. The cap went into effect in 2010, after then-Gov. Charlie Crist signed it into law following a three-year rate freeze for Citizens.
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In a sweeping property insurance bill that passed in 2021, lawmakers allowed the cap to increase by 1% each year through 2026, where the largest increase Citizens could request is 15%.
Number of those insured by Citizens doubles in 2 years
Florida lawmakers have stepped in repeatedly over the past year with legislation trying to attract more private carriers to the state known for its costly storms, as well as to help Citizens shed policies.
Citizens soared to 1.3 million customers at the end of May, more than double what it was two years earlier as more Floridians unable to obtain private property insurance seek coverage from the government-backed company. Cerio said it could reach 1.7 million policyholders by the end of the year.
During two special sessions in the past year, the Republican-controlled Legislature steered $3 billion in taxpayer money into reinsurance accounts the industry could tap. Lawmakers also have added barriers preventing customers from suing their insurance companies when unsatisfied with claim outcomes.
Gov. Ron DeSantis and Republican leaders in the Legislature were quick to embrace claims by industry officials that lawsuit abuse is driving rates and keeping many companies out of the Florida market.
DeSantis drew heat from outnumbered Democrats in Florida for his approach.
Trump vs. DeSantis on property insurance
But even former President Donald Trump, who polls show clearly leads the field for the 2024 Republican presidential nomination DeSantis also is seeking, blasted the Florida governor for what he called on social media, “the biggest industry BAILOUT to Globalist Insurance Companies, in HISTORY.”
Such attacks caught the governor’s attention, and helped prompt Republican leaders in the Legislature this spring to approve an insurer accountability bill that would increase fines for poor claims-handling by companies and add some consumer safeguards. DeSantis signed the measure last month.
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Steps also have been taken by lawmakers to force customers out of Citizens and into private coverage if they get an offer less than 20% more expensive. Citizens policyholders are now required to get flood insurance, regardless of whether they live in a FEMA-designated flood zone.
“The best way, and the most long-term successful way for Citizens to wind up depopulating, is through what I would call the organic or natural growth of the recovery of the private market,” said Florida Insurance Commissioner Michael Yaworsky. “That will take time.”
Hannah Morse covers consumer issues for The Palm Beach Post. Drop a line at hmorse@pbpost.com, call 561-820-4833 or follow her on Twitter @mannahhorse.
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