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Economy / Business

Citizens Insurance Looks To Increase Florida Homeowner Rates

Damage to beach-front home
News Service of Florida
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It's an effort to stem a surge in new policies with the state-backed insurer.

Citizens Property Insurance Corp. leaders Wednesday supported looking for ways to increase homeowners’ rates, as they try to stem a flood of new policies at the state-backed insurer.

The Citizens Board of Governors effectively put on hold until late January a decision about a rate filing, as they expressed concerns about Citizens becoming what Chairman Carlos Beruff called the “800-pound gorilla” in the state’s property-insurance market.

Citizens officials said the state-backed insurer has lower rates than many private insurers, giving consumers an incentive to buy and keep Citizens policies. At the same time, Citizens President and CEO Barry Gilway said the private insurance market has “severe profitability problems,” limiting companies’ capacity to take on new customers and helping spur requests for hefty rate increases.

“As the market hardens, people are going to come more and more to Citizens to look for the opportunity,” Gilway said.

The Citizens board had been slated Wednesday to approve an average 3.7 percent rate increase that was proposed to take effect in August. But it will wait until a Jan. 26 meeting to make a final decision on a rate filing to give staff members time to meet with insurance regulators and consider ways that rates could go higher. The state Office of Insurance Regulation ultimately has to approve any increases.

“I believe that (an average 3.7 percent increase) is the worst-case scenario because that doesn’t solve our problems,” Beruff said.

Citizens’ rates have long been controversial, with private insurers and some state officials arguing that the rates should be increased because they are not actuarially sound. But lawmakers and regulators also have faced heavy pressure from consumers to hold down rates, as residents in some areas complained they could not find affordable private coverage.

One factor that has held down Citizens’ rates, for example, was a decision by lawmakers to prevent individual policyholders from seeing rate increases of more than 10 percent a year.

Citizens board member Carlos Lopez-Cantera, a former lieutenant governor and state House majority leader, said Citizens should do what it can to move policies to the private insurance market. But he also pointed to the role of the Legislature in creating laws that govern Citizens, saying lawmakers can make changes that they “see fit.”

While Citizens was designed as an insurer of last resort, it has seen a surge in policies that is projected to continue through 2021. Citizens had about 427,000 policies in 2018, a number that is projected to increase to 532,135 this year and 630,257 next year, according to a report presented to the board Wednesday.

Beruff, a home builder, said he thinks growth in the housing market could push the number of Citizens policies closer to 700,000 next year.

Part of the concern about Citizens’ growth stems from potential financial exposure if major hurricanes hit the state. In such a situation, part of the costs of covering Citizens’ claims could fall on insurance policyholders who are not Citizens customers. That is because of a system of what are known as “assessments” that provide a backstop for Citizens.

But while Citizens board members agreed Wednesday to look for ways to raise rates more than an average of 3.7 percent next year, they deadlocked on an idea that would lead to many new customers paying higher rates than existing customers.

The idea, spearheaded by state Sen. Jeff Brandes, R-St. Petersburg, would involve charging new customers actuarially sound rates, which in many cases would be higher than current customers pay. The Citizens board considered a proposal Wednesday to take the idea to the Office of Insurance Regulation, but the proposal was blocked in a 4-4 vote.

Opponents raised objections about the possibility of neighbors having potentially varying insurance rates for similar properties and said they think such a policy decision should be made by the Legislature.

“This is more of a politicians’ call than our call,” said board member Marc Dunbar, a lawyer and lobbyist.

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