Under Pressure, Citizens Property Insurance panel considers phase-in of rate hike on new policies
May 17, 2012
The following article was published in the Florida Current on May 17, 2012:
Under pressure, Citizens panel considers phase-in of rate hike on new policies
By Gray Rohrer
A panel of Citizens Property Insurance Corp.’s board of governors looked at taking a slower approach to a proposed 30 percent statewide rate increase for new policies during a meeting Thursday.
Under a plan that has drawn heated criticism from some lawmakers and consumer advocates, rates for new policies would be “decoupled” from existing policies, setting aside the 10 percent cap on annual rate increases put in place by legislators three years ago.
Although the statewide average increase would be about 30 percent, some areas would see greater increases. In parts of Miami-Dade County, homeowner’s premiums would rise 95 percent. That drew the ire of Miami lawmakers Rep. Carlos Lopez-Cantera and Sen. Anitere Flores, both Republicans, who sent scathing letters to Citizens interim director Tom Grady, and The Miami Herald, respectively, ahead of the meeting. Flores vowed to pass a bill clarifying that the cap applies to all policies.
“In the meantime I urge the board of Citizens to reject this proposal which is nothing short of immoral,” Flores wrote in her letter.
Board members responded by raising the possibility of phasing in the rate increase over time, although no exact plan was put forth.
“Probably the sense is some moderation or phase-in of these rates is on everybody’s mind at this time,” board member John Wortman said.
The full board will develop rate requests to submit to the Office of Insurance Regulation during their June and July meetings. Grady, however, defended the move to remove the cap on annual rate hikes for new business.
“Can we decouple? Legally we think we can,” Grady said.
Some board members defended their “decoupling” plan as necessary to align state-run Citizens’ rates with the private market and to avoid assessments on all homeowners policies in the state should a massive hurricane strike.
“The data indicates a pretty significant gap between … the cap and the rate need to get Citizens out of the way of the private market,” board member John Rollins said.
Rollins and other board members chided recent media reports they said overhyped the plan to increase rates for new business, as well as new policies enacted this year to reduce coverage on existing policies and review homes for reductions in mitigation credits. Others, however, warned that bad press and hostile lawmakers are counterproductive to their goal of higher, more actuarially sound rates.
Chairman Carlos Lacasa noted that Citizens’ original rate request of a 447 percent hike for sinkhole policies last year triggered an outcry among lawmakers and the public, which led to a much lower increase and did significant damage to their brand.
He said that incident served “only to draw an equally vitriolic reaction in this year’s (legislative) session.”
Sen. Mike Fasano, R-New Port Richey, who held rallies to protest the original sinkhole rate hike last summer before Citizens lowered their proposal, has promised a lawsuit if Citizens removes the 10 percent cap on new policies.
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