The Florida Office of Insurance Regulation has approved rate increases for Citizens Property Insurance Corp.’s homeowners policies just slightly below the rates the state-sponsored insurer was seeking.
The new rates, which take effect Jan. 1, 2013, include a 10.8% average increase for homeowners policies, compared with the company’s request of 11.8% increases. For dwelling/fire policies, Citizens had been seeking an increase of 12%, but the FLOIR approved only an 8.8% increase. Both totals are averaged across both Citizens’ high-risk Coastal Account and in-land Personal Lines Account.
The rates include estimated cost-savings of 54.7% for sinkhole coverage, based on changes stemming from S.B. 408, which Gov. Rick Scott signed in May 2011. That bill narrowed the definition of “structural damage” brought on by a sinkhole loss and required sinkhole claims to be filed within two years of the loss. Additionally, if a policyholder contests a sinkhole claim denial, the legislation requires the insured to pay up to 50% of testing costs, up to $2,500.
Despite those changes, sinkhole rates are still going up for Citizens’ policyholders. Across the state, policyholders with HO-3 homeowners policies from Citizens will see their sinkhole rates rise by an average 21.4%, compared with Citizens’ request of a 29.6% percent hike. For dwelling/fire policies, sinkhole rates are going up an average of 44.8%, which is actually slightly higher than Citizens’ request of a 43.7% increase.
FLOIR held a Sept. 19 public hearing on Citizens’ proposed rate increases on its homeowners, mobile home and dwelling/fire lines of business. The company requested homeowners rate increases that averaged 11.1% in the Coastal Account and 12% for the Personal Lines Account.
Those averages include sinkhole coverage, where Citizens’ requested rates varied widely across the state, from a 35.1% cut for the in-land portions of Palm Beach County to a 111.9% increase in Marion County. In the key sinkhole counties of Hernando, Hillsborough and Pasco, the company sought increases for sinkhole coverage that averaged 50%.
While FLOIR’s approval of this latest round of rate increases must be welcomed as a step forward, the approved rate increases are a far cry from solving Citizens’ funding problems. Citizens’ below-market rates are enforced by a state law that limits its annual rate increases to 10% a year. The company insures about 23% of the Florida market, with roughly 45% of Citizens policyholders concentrated in Miami-Dade, Broward, Palm Beach and Monroe counties.
Despite the office’s recent approval of another 60,000 take-out policies from Citizens, there is still much work to be done. Though the year-to-date total of take-outs is 84,339, with another 150,000 policies set to be acquired by four domestic insurers in November, Citizens President Barry Gilway said last month that Citizens continues to add another 30,000 policies a month, far outpacing the rate of take-outs.
We’ve been supportive of the notion that a plan under consideration to incent private insurers to take out more policies with the use of loans from Citizens’ surplus is worth exploring, but it is far from a panacea. Until the cap that keeps Citizens’ rates much lower than private insurers — and lower than is actuarially indicated — is raised and ultimately lifted, the company will continue to add policies faster than it can possibly shed them.