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Regulators Eye Citizens Insurance Rate Increases

Will Fla.-owned Citizens Insurance rates go up an average 7.3%? Fla. regulators questioned Citizens officials Monday and are analyzing the request.

TALLAHASSEE, Fla. – Florida regulators on Monday dug into a proposal to raise rates for customers of Citizens Property Insurance Corp., with the state-backed insurer saying its policy counts – and financial risks – are increasing because of problems in the private insurance market.

Citizens is seeking an overall rate increase of 7.3%, though hikes would vary widely based on factors such as types of policies and locations. Regulators held a more than three-hour hearing Monday on the request, with actuaries and the state’s insurance consumer advocate questioning Citizens officials.

The Citizens Board of Governors has pushed to increase rates as the company has gained more than 100,000 policies during the past year. Citizens President and CEO Barry Gilway told regulators that private insurers have been losing money in Florida and are taking steps such as not writing new policies or placing restrictions on the types of properties they will cover.

“The reality is the marketplace in Florida is shutting down,” Gilway told regulators.

Gilway said Citizens’ rates, in many cases, are lower than what private insurers charge. Also in arguing for higher rates, Citizens officials say they’re trying to prevent the possibility of imposing surcharges, known as “assessments,” on insurance policyholders across the state – including non-Citizens customers – if massive damage is caused by a major hurricane or multiple hurricanes.

With Citizens created as an insurer of last resort, its rates have long been controversial. In some areas, homeowners have little choice but to buy coverage from Citizens, as was evidenced Monday during the hearing when customers from the Florida Keys argued Monroe County should not face rate increases.

Tasha Carter, the state’s insurance consumer advocate, asked whether rate increases could be delayed until 2022 as many customers continue to struggle financially during the COVID-19 pandemic.

Gilway said Citizens put a moratorium on policy cancellations last March. It has recently lifted the moratorium but is working individually with customers who have financial problems.

The proposed rate increases, if approved by the state Office of Insurance Regulation, could take effect in August. While the overall proposed rate increase would be 7.3%, the average hike for the most-common type of homeowners’ policies would be 6.1%, according to Citizens.

New customers in the future, however, could pay substantially higher rates than current Citizens’ policyholders. A 2011 law caps annual increases for customers at 10%, which means that many don’t pay actuarially sound rates. However, Citizens asked regulators for approval to charge new customers actuarially sound rates.

Kayne Smith, an actuary for the Office of Insurance Regulation, appeared to question that proposal during Monday’s hearing. “On what basis should capping be revised so it only applies to renewals?” Smith asked.

Belinda Miller, interim general counsel for Citizens, said the law about capping annual increases can be interpreted to only apply to current policyholders, not to new customers.

Citizens had 552,340 policies as of Feb. 28, up from 446,327 a year earlier, according to data on its website. Gilway said Citizens expects to have about 700,000 policies at the end of this year.

It’s not clear when regulators will decide whether to approve the rate proposals, though Insurance Commissioner David Altmaier said the Office of Insurance Regulation will take written comments from the public through March 26.

The proposal comes amid a debate in the Legislature about making changes to try to bolster the property-insurance market. A bill (SB 76) moving through the Senate would take steps to restrict attorney fees in property-insurance lawsuits and allow insurers to limit amounts they pay for roof repairs. Citizens and other insurers blame litigation for helping drive up insurance rates.

Source: News Service of Florida