Floridians Upset Over Citizens Increases

Marci L. Rose’s home and rental properties escaped serious damage when hurricanes battered the state in 2004 and 2005, but she might lose them anyway.
Like thousands of Floridians, the Key West real estate attorney has seen dramatic increases in her rates from Citizens Property Insurance, the state’s carrier of last resort. On just one of her three properties, a duplex that brings in about $3,600 a month in rent, her Citizens rates have gone from $4,087 annually in 2005 to $7,475 this year. That’s an 83 percent increase.
“It’s killing me. It’s putting me in a position to have to sell my property,” said Rose, 40. “They are making it so that only the very wealthy can afford to live here.”
The average Citizens customer saw rates jump 16.2 percent this year, a reflection of the eight hurricanes that have battered Florida the past two years, causing $30.2 billion in insured losses and 2.8 million claims. That has private insurers fleeing the state, forcing Citizens to take on a bigger slice of the insurance market.
Citizens has asked from another 45 percent increase, but it has not yet been approved by regulators. More increases are expected. Citizens has 833,797 customers or 13.6 percent of the market through the end of 2005. State Farm, the state’s largest insurer, has just over 1 million policyholders, or 17.2 percent of the market.
To help Citizens, the Legislature gave it $715 million to help offset the 2005 deficit and reduce its 11 percent assessment to about 2.5 percent, but that covers less than half of its $1.7 billion deficit for the two years.
Monroe County residents, including Rose, have been fighting the increase from Citizens saying residents there have been hit by exorbitant rate increases that are not justified. A hearing is scheduled soon with the Office of Insurance Regulation, which froze Monroe’s rates at the 2005 level. Monroe County policyholders pay about $20.91 per $1,000 of coverage, compared with $2.60 in Jacksonville.
“We are in a crisis situation,” said Teri Johnston, a spokeswoman for FIRM, an acronym for Fair Insurance Rates in Monroe. “It’s an area that needs total reform. They (the Legislature) just couldn’t solve it in the time frame that they had.”
The Florida Insurance Council, an industry group, said it is facing tough times from the eight hurricanes and four tropical storms to hit the state in a 15-month period.
“Florida has an insurance problem, or at least that’s the perception of many consumers and political figures. Insurance has a Florida problem, or at least that’s the perception of many insurers and investors around the world. There’s more than a little truth in each of those perceptions, but the reality is that Florida has a hurricane problem,” Sam Miller, the council’s executive vice president, wrote in a report about the active 2004 and 2005 hurricane seasons and their effect on the insurance industry.
It’s not only Citizens’ policyholders that are upset. All Florida property owners are being assessed to help make up for the deficit.
Carol Brockway, who lives in Winter Haven, buys her insurance from State Farm and doesn’t feel it is fair for her to pay for Citizens’ losses.
“The Legislature is trying to be an insurance company and failing miserably,” Brockway said, who called the assessment “a hidden tax.”
But Randy E. Dumm, associate professor of risk management and insurance at Florida State University, said the Legislature had little choice but to bail out Citizens and allow it and other insurers to increase rates.
Dumm was a member of the Task Force on Long-Term Solutions for Florida’s Insurance Market, which issued its report to the Legislature in March. It provided much of the framework for the legislation approved in the waning moments of this year’s session.
“Because of the absolute size of the economic losses that are possible due to hurricanes in Florida, the private market, public mechanisms, and even the state itself simply do not have sufficient capacity to provide recovery from a truly mega-catastrophic hurricane event,” the report states.
Dumm said he understands the angst of policyholders when they get sticker shock by opening the insurance bills.
“I’m not happy either as a consumer, but the alternative is not having a functioning insurance market,” he concluded.

Topics Florida Catastrophe Hurricane Market