Continuing to point at “out of control” water damage claims, the Citizens Property Insurance Board of Governors on Tuesday unanimously backed proposed rate increases that would hit South Florida policyholders hardest next year.
The changes, if approved by state regulators, would boost personal-lines policies on average by 5.3 percent and commercial lines by 8.4 percent. Personal-lines policyholders are homeowners, condominium-unit owners and renters.
The state-backed insurer also moved forward with a “stopgap” approach to water-damage claims not caused by hurricanes, floods or other weather-related events. Citizens officials contend those claims have been a key factor in recent premium increases.
Among the changes, coverage for water-damage repairs unrelated to weather will be capped at $10,000 for policyholders who do not take part in a “managed repair” program. That program involves contractors approved by Citizens.
“We're not sitting back and saying, `Hey we'll wait until next year, and maybe we can get something done from a legislative standpoint next year,' ” Citizens President and CEO Barry Gilway says. “We can't wait. It doesn't make any sense and we don't know — particularly with the current structure of the Legislature — we don't know if we'll be any more successful next year.”
Citizens and other insurers argue that the Legislature needs to make changes related to an insurance practice known as “assignment of benefits.” That practice involves homeowners signing over benefits to contractors, who ultimately pursue payments from insurance companies.
Insurers contend the practice has become riddled with fraud and litigation, particularly involving water-damage claims. Legislation about the issue failed to pass during the spring session.
“We have to go under the assumption that we're not going to get any legislative relief,” Citizens Vice Chairman Don Glisson said. “We're just going to have to come up with a defensive game plan to do the best we can to mitigate it because I'm not convinced we're going to get any relief next year, the year after, who knows.”
While the insurance industry criticizes the assignment-of-benefits process, plaintiffs' attorneys and contractors argue, in part, the practice helps homeowners hire contractors quickly to repair damage and also can help force insurers to properly pay claims.
Citizens officials say litigated water-damage claims tied to assignment of benefits are driving up homeowners' rates. The issue has been most prominent in Southeast Florida.
“These proposed rate increases and product changes are critical for Citizens' efforts to bring some relief to a market that is being made increasingly expensive by unnecessary litigation and out-of-control water loss claims,” Citizens Chairman Chris Gardner said in a prepared statement. “Unfortunately, we are making it more expensive for many of our customers to own a home.”
The 2018 rate proposal still must be approved by the state Office of Insurance Regulation.
A year ago, after Citizens proposed a 6.8 percent statewide rate increase for multi-peril accounts, insurance regulators approved a 6.4 percent average increase.
The requested changes for 2018 vary, depending on types of coverage and locations of property.
Multi-peril homeowners' policies would go up 6.7 percent statewide --- from an average of $2,512 to $2,681.
While most counties are actually projected to see multi-peril rates go down, the proposal would boost rates 10.5 percent in Miami-Dade County, 10.4 percent in Broward County, and 9.4 percent in Palm Beach County.
Homeowners in those counties already pay higher rates that in most other parts of the state.
The average multi-peril policy currently is $3,421 in Miami-Dade, $2,842 in Broward and $2,631 in Palm Beach County.
In Leon County, which includes Tallahassee, the 85 homeowners with that multi-peril coverage would see the average rate go from an average of $929 to $840. The 271 multi-peril policies in Duval County, which includes Jacksonville, would see rates go on average from $1,235 to $1,191.
Meanwhile, wind-only homeowners' policies would go up on average 1.2 percent — from $2,769 to $2,802.
Such wind-only policies would go down 0.8 percent in Broward and drop 5.3 percent in Miami-Dade counties. Yet, Palm Beach homeowners with those wind-only policies would see rates go up 2.6 percent, and in Monroe County, which includes the Florida Keys, the wind-only rate would grow 3.9 percent.
Citizens officials credited past annual increases in wind-only rates along with lowered costs of reinsurance — backup insurance for insurers — for those policies being more actuarially sound when compared to costs on the private market.