Public workshop in Miami turns into public outcry against Citizens Property Insurance

Jul 17, 2012

The following article was published in the Bradenton Herald on July 17, 2012:

Public Workshop in Miami Turns Into Public Outcry Against Citizens Insurance

By Toluse Olorunnipa and Martha Brannigan

The board of Citizens Property Insurance Corp. received a tongue-lashing from lawmakers and homeowners during a Monday workshop in Miami after unveiling a plan to raise rates by an average of 7.5 percent next year.

The proposed statewide rate increase — which is higher in places like South Florida — translates to about $173 million in higher costs for Florida homeowners, who have already sustained a barrage of cost increases and coverage reductions this year.

South Floridians and their elected officials bashed Citizens’ board for considering raising costs further for struggling homeowners.

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

Lopez-Cantera is running against incumbent Pedro Garcia for the non-partisan post of Miami-Dade County property appraiser.

Citizens’ board held the public workshop at the JW Marriott in Brickell, with the aim of adding more transparency to its annual rate filing process. About 50 people attended. Next week, Citizens will finalize its rate plan, which includes increases of up to 11.4 percent in parts of South Florida. The Legislature has placed a 10 percent cap on annual rate increases at Citizens, with some wiggle room for surcharges.

Board members said rate increases are necessary for the state-run insurer as it battles mushrooming sinkhole losses and a growing gap between its prices and premiums in the private sector. Gov. Rick Scott has tasked the board with shrinking the size of Citizens—which insurers 1.4 million—and company executives say the high level of risk could endanger Florida’s economy if a hurricane hits.

Barry Gilway, Citizens’ new president, said the company subsidizes homeowners by charging rates that are, in some cases, 60 percent less than what the private market charges. Company rate filings indicate that average rates are 15 percent to 27 percent lower than they should be.

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

But using insurance industry jargon such as “assessment load,” “actuarially unsound” and “risk load,” the board struggled to connect with some in the audience.

“My eyes glazed over five minutes into the meeting,” said James Curry, a Fort Lauderdale landlord who saw his insurance premiums with Citizens go up 41 percent this year after an inspection.

Curry said he moved from California to Florida because of California’s high taxes but is now facing a new set of cost-of-living challenges.

“I thought I solved my problem, but my problem’s back,” he said. “My insurance costs are almost as high as my property taxes. It’s crazy.”

State Rep. Frank Artiles, a Miami Republican and an outspoken critic of Citizens, slammed the company’s plan to raise rates on South Florida homeowners. Artiles said Citizens is wasting money on litigation costs and administrative expenses.

“I do not believe that a rate increase at this time is the right solution because your costs are not under control,” he said. “We do not have a choice in Miami-Dade County. We are forced to be in Citizens.”

Citizens has defended its financial management over the last several years in which Florida has not been hit by a hurricane. Board members also said they realized how their decisions impacted homeowners.

“There has never been a board of governors more sensitive to the impact’’ on homeowners, said Carlos Lacasa, chairman of the board. “We struggle with that question every day.’’

Aside from raising rates, Citizens is proposing ways to chip away at coverage, thus reducing its risks. For instance, the insurer wants to place a $15,000 limit on losses caused by various types of water damage. The company said water-related losses such as plumbing leaks represent the top cause of non-catastrophic and non-sinkhole losses it faces.

Citizens also unveiled separate filings for sinkhole rates, which are not covered by the state’s 10 percent cap on rate increases. The insurer said sinkhole rates, on average, should be about 263 percent higher in order to cover the amount of risk on the company’s books.

For sinkhole coverage in places like Pasco and Hernando counties, Citizens’ models indicate homeowners should be paying an average of $4,100 to $9,700 more each year. The board will likely try to phase in those higher costs over time with less aggressive rate hikes.

The board will also decide next week whether to move forward with a controversial plan to stop applying the Legislature’s 10 percent cap to new customers. Rates for new customers could increase 15 percent, 20 percent or 25 percent.