Florida’s Citizens Property Insurance Board Approves 2017 Rates

Jun 22, 2016


At a meeting in Maitland Florida today, June 22, 2016, Citizens Property Insurance Corporation’s (“Citizens”) Board of Governors (“Board”) approved recommended rates for 2017, describing them as ” . . . responsive to rising non-weather water losses and assignment of benefit abuse that left unchecked will force rate hikes for years to come.”

Board members unanimously recommended a 6.8 percent statewide increase for personal lines policyholders, reversing a recent trend of lower rates for all but South Florida customers.  The effects of water losses, assignment of benefits abuse and increased litigation spreading across the state were cited as the reason.

In its press release issued today, Citizens explained that, without significant reform, its policyholders ” . . . must brace themselves for continued rate hikes as water losses and increased costs surrounding assignment of benefits eat into surplus and force Citizens to repeatedly raise rates to fulfill its statutory obligations to set actuarially sound rates under the glide path.”

Citizens is required by law to recommend rates that are actuarially sound, while complying with a legislative glide path that caps rate increases at 10 percent, excluding coverage changes and surcharges. 

“The issue is complex and not unique to Citizens,” said Barry Gilway, Citizens President, CEO and Executive Director.  “A solution will require the cooperative efforts of all stakeholders.”

“The causes for these increases include the assignment of benefits (“AOB”) document itself, referral fees and other inducements, unchecked solicitation for mitigation business, lack of licensing and regulation and a general lack of knowledge on the part of customers of the risks involved with an AOB,” Mr. Gilway said.  The bottom line is that this is a crisis, not just for Citizens, but the entire Florida property market.”

Under the rates proposed today, inland homeowners with multi-peril policies would see an average increase of 6.3 percent, while homeowners along the coast would see rates climb by an average of 8.6 percent.  Rates for condominium unit owners would rise by a statewide average of 7.1 percent.  However, despite statewide increases, thousands of policyholders will see rate reductions, Citizens noted.

It was emphasized that the 2017 proposed rates would have been higher had the Florida Office of Insurance Regulation (“OIR”) not recently approved a set of Citizens policy contract changes regarding emergency services and notification requirements before permanent repairs can begin.  Following Citizens’ lead, many private insurance companies have filed similar requests.

The rate recommendations will be submitted to the OIR, which will make its decision after holding a public hearing later this summer.  The new rates will go into effect after January 1, 2017.

During today’s meeting, a representative from Fair Insurance Rates in Monroe said the increasing rates have caused negative economic issues for the Keys, exacerbating problems such as affordable housing and workforce availability.  Calling the spread in the various ratemaking models “a mess,” he asked the Board to ensure that Citizens’ overhead doesn’t become a cost factor as depopulation continues, and that Keys residents are not “paying for other people’s problems.”  He called upon the Board not to interpret scientific data “in the worst way possible.”  It was noted that, as of this year, the Florida Public Hurricane Loss Model is no longer the statutory minimum benchmark for ratemaking.

“Every year, our actuaries use recognized standards to formulate the rate recommendations presented to this board,” Citizens Chairman Chris Gardner said.  “We don’t want to raise rates, but we must respond to the actuarial data. Unfortunately, our policyholders are being required to pay higher rates because of inflated claims, increased litigation and abuse.  We can’t keep asking them to do that.”

Citizens’ analyses show water losses have increased in both severity and frequency.  AOB claims filed with Citizens have been more expensive and far more likely to lead to litigation, which only adds to the cost of the claim, it was explained. 

Under current conditions, Citizens explained that rates in Miami-Dade County would need to nearly triple to adequately pay claims.  Statewide, personal lines rates would have to rise an average of 65 percent.

The statistic was cited that South Florida policyholders are far more likely to assign benefits to a third party such as a contractor, water mitigation company or public adjuster before submitting their claim.  According to Citizens, nearly one in four South Florida policyholders assign their benefits to a third party.

In July, Citizens will submit its 2017 recommended rates to the Office of Insurance Regulation, which must establish rates for Citizens before they take effect.

Citizens distributed a 2017 rate kit yesterday to provide information about its 2017 rate filing, including county-by-county estimates for particular policy types.  Additional information and answers to common questions about the rates and premiums are included a section marked “Citizens 2017 Rates Frequently Asked Questions.”  The kit also includes additional information about Citizens’ costs and projected rate need for 2017.

To access these materials, click on the hyperlinks below:

 To view the materials from today’s Board meeting, click here.


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