Business Week: Florida regulators approve Citizens Property Insurance rate increases
Oct 3, 2012
The following article was published in Bloomberg Business Week on October 3, 2012:
By Brent Kallestad
TALLAHASSEE, Fla. (AP) — Florida businesses and homeowners doing business with state-backed Citizens Property Insurance Corp. will see double-digit premium increases in most cases early next year.
The Office of Insurance Regulation on Tuesday approved a 10.8 percent increase on homeowners’ policies and an 8.8 percent increase on dwelling fire rates. Homeowners with sinkhole coverage will see an increase of 21.4 percent on their bills and those with dwelling fire policies who want sinkhole coverage will get a 44.8 percent increase. Most take effect Jan. 1. Rates for wind-only policies take effect Feb. 1.
OIR is scheduled to announce its decision on rate increases on mobile home and commercial lines policies later this month.
“Our primary goal is to ensure Citizens policyholders are treated fairly and retain an opportunity to return back to a robust private insurance market,” Florida Insurance Commissioner Kevin McCarty said.
State Sen. Mike Fasano, R-New Port Richey, condemned the increases.
“They just don’t get it in Tallahassee,” Fasano said. “We’d all like to see Citizens get depopulated, but not at the cost to a homeowner having to give up their home.”
Citizens’ spokeswoman Christine Ashburn said the company is working with the state to develop sounder rates to encourage customers to find private insurance coverage.
Citizens’ has been boosting its rates in recent years to reach parity with private commercial carriers in hopes of shedding hundreds of thousands of policies. Originally designed as the “insurer of last resort,” it has instead become the largest policy carrier for homes and businesses in Florida with roughly 1.4 million customers. However, its maximum exposure far exceeds its financial ability to pay claims in a timely fashion without further charging policyholders or assessing non-Citizens insurance buyers, company officials say.
Florida residents with auto, residential or commercial property insurance policies already pay a 1 percent assessment to shore up the Hurricane Catastrophe Fund tagged with huge losses after the 2004 and 2005 storm seasons.
The insurer has also made other coverage changes to reduce its overall exposure, which also has drawn criticism.
“Citizens’ changed the rules — taking away mitigation discounts, reducing coverage, and changing replacement values,” said Sean Shaw, a consumer advocate and founder of the Policyholders of Florida. “Citizens’ is getting away with charging more for less and policyholders and our economy are worse off because of it.”
Regulators last month approved another 60,000 policies for removal from Citizens’ and earlier approved 150,000 policies for acquisition by four Florida-based companies beginning in November. Citizens’ policyholders were to be notified of the take-out request Oct. 1, and will have 30 days to accept or reject the offer. If policyholders do not respond, they’ll be “assumed” by a private sector company.
Citizens’ was created by the Legislature in 2002 to provide insurance to homeowners in high-risk areas and those who cannot find coverage in the private market. It was largely an offshoot of an underwriting association formed by the state in the aftermath of Hurricane Andrew in August 1992.
View the original article here: http://www.businessweek.com/ap/2012-10-03/fla-dot-regulators-citizens-rate-increases