Could Citizens Become Too Competitive in Florida?

Florida’s state-backed property insurer’s proposed rate reduction is raising questions about whether it will make the insurer competitive with the private market.

Citizens Property Insurance Corp. recently proposed 2015 rates that include a statewide average 2.9 percent rate decrease on all residential policyholders.

The proposed rate cut comes after eight years without any significant hurricane losses and five years of rate increases following the so-called “glide-path,” which limits annual rate increases to 10 percent.

If approved by regulators, seven in 10 Citizens personal lines policyholders will see a rate reduction next year. The statewide average homeowners’ premium would drop from $2,538 to $2,379.

Not everyone is greeting the proposed rate cut as good news.

Florida Property and Casualty Association Executive Director William Stander has heard rumblings over what the rate cut could mean for insurers’ expansion plans.

“I have heard some concerns among companies that Citizens’ rate trajectory potentially could interfere with their depopulation efforts,” said Stander.

Florida Association of Insurance Agents President Jeff Grady said that as a matter of perception, any rate cut raises questions. “It does seem to depart from the insurer of last resort having the highest rates,” Grady said.

“The market has started floating downward and Citizens is following the market in that sense,” said Grady. “But some insurers are not and in that sense Citizens is more competitive.”

The state Office of Insurance Regulation approved 43 private insurer rate filings between January 1 and June 30, which cover homeowners’, mobile homeowners’ and dwelling fire policies. Out of those 43 insurers, 12 received rate decreases and eight resulted in no changes in rates.

Even the insurers that are receiving rate increases are raising rates modest amounts averaging below 10 percent.

Some question if Citizens should lower its rates as long as there remains a potential $2.4 billion assessment burden on all state policyholders.

Citizens Spokesperson Michael Peltier said the insurer is aware that issues are being raised over the rate reductions. However, he said, coming after so many years of rate increases, policyholders deserve what the actuaries recommended.

“We are sensitive to our mandate to be the market of last resort,” said Peltier. “But we are not insensitive to the burdens rates have on our policyholders.”

Peltier also noted that in some high-risk areas, Citizens remains the only market and most of those rates have yet to reach actuarial levels.

One consumer group has come out in support of Citizens’ proposed rate changes.

Florida Association of Insurance Reform President Jay Neal said Citizens faces an environment that no matter what action it takes it is going to face critics. Even so, he said, Citizens’ officials have to manage the insurer in the best way possible.

“I think things are in a relative balance,” Neal said. “They went and bought reinsurance at historically low rates, the assessment burden is going down and they started the clearinghouse.”

The clearinghouse gives private insurers the first chance to write a policy before it goes to Citizens.

Topics Florida Carriers Homeowners