South Florida Not Receptive to Citizens’ Rate Hike Plans

By | July 18, 2012

Executives and the board of governors of Florida’s largest state-back property insurer received a rude reception at a public rate hearing in Miami where they indicated they will consider increasing rates on existing homeowners policies by a statewide average 7.4 percent.

Citizens Property Insurance Corp. officials held the public hearing in an attempt to bring more transparency to the rate making process. It came just days away from a July 27 meeting where the insure is scheduled to finalize the rate request it will be submitting to state regulators.

That rate filing is expected to include not only the 7.4 percent rate increase on homeowners policies but also a 9.6 percent rate increase in renters’ policies, a rate hike of 8.7 percent on condominium owners’ policies, and 2.8 percent rate hike on mobile home policies.

There are also likely to be additional increases for sinkhole coverage. Citizens indicated it needs a 263 percent increase in sinkhole rates on homeowners’ policies. However, the board is likely to phase in any rate demand as was the case last year when it agreed to a one-year increase over 36 percent.

The July 27 meeting is also expected to include a discussion on whether to raise rates on new business above the current 10 percent annual cap spelled-out in state law.

New Citizens President Barry Gilway said that the insurer’s rates are significantly lower than what they should be and the insurer’s goal is to eventually reach some level of rate adequacy.

“I believe we have to move in a measured manner toward closing that gap,” said Gilway.

The response to the rate plan at the public rate hearing from a south Florida crowd that would see the majority of those increases crowd was far from receptive.

“The decisions you make affect people that you may not think about,” said Rep. Carlos Lopez-Cantera, R-Miami. “They don’t get the opportunity to come meet in a nice hotel board room and have food delivered to them.”

Citizens board member John Rollins said he is sensitive to what hiking rates on new business from the 10 percent cap would mean. At the same time, however, he said that as long as the insurer is lowballing the competition, there will be little incentive for private insurers to enter the market.

Rollins said that under the current rate structure, “we are taking action that perpetuates the gap between us and the private market.”

James Curry, a Fort Lauderdale developer and property owner, said that such arguments were lost on him because in his case Citizens is the only option.

“Citizens rates on my property are just like a tax, I have no choice,” said Curry.

Gilway said the insurer is sensitive to the fact that abrupt shifts in rates do have an impact on policyholders and the economy at large.

“I sense very little appetite on the board, or the staff or elsewhere to make substantial changes in the marketplace that will have a significant effect on the economy,” said Gilway.

As a portent of things to come next year in the legislature, some lawmakers are already drawing a line over exempting rates on new business from the 10-percent cap. Twenty-one state lawmakers have from mainly northern and central Florida have come out in favor of the plan, while a host of south Florida lawmakers have vowed to take legislative steps to prevent it.

Rep. Frank Artiles, R-Miami, said this is just the beginning of a propaganda war.

“That propaganda is that north Florida is subsidizing south Florida,” said Artiles. “If a storm were to hit tomorrow, south Florida is going to pay the assessments, not north Florida.”

In addition to increasing rates, Citizens officials again proposed a reduction in coverage. The insurer wants to place a $15,000 limit on various water damage claims from plumbing and air conditioning leaks. Reportedly, water damage claims represent the top non-catastrophic and non-sinkhole losses for Citizens.

In 2011, Citizens stopped insuring screen porches, carports, pool enclosures, and placed a $10,000 cap on most cosmetic floor damages.

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