Florida’s Citizens Defends Proposed 11.2% Rate Increase

Executives of Florida’s state-backed insurer defended a proposed statewide average 11.2 percent increase in homeowners rates as regulators, consumer advocates and other officials questioned the need for the increases, citing a projected reduction in sinkhole claims, the use of computer models, and alleged mismanagement of mitigation credits and travel expenses.

At a public hearing in Miami, Citizens Property Insurance presented rate filings that if approved will raise premiums for homeowners, renters, condominium owners, mobile home owners, and commercial properties.

Citizens President Barry Gilway told regulators that they should be aware that the insurer is continuing to grow even as it attempts to shed policies. He said the insurer is receiving 8,000 policies a week at an annual monthly increase of 30,000 policies. So far this year, private insurers have removed 84,000 policies, a number that is slated to grow since regulators have just approved four companies to take out up to 150,000.

But for the time being, said Gilway, Citizens 1.46 million policyholder roll will continue to grow. “The math means that we will write 300,000 policies this year even with the substantial take outs this year,” Gilway said.

Gilway said that the insurer had adhered to the statutory “glidepath” limiting annual increases to 10 percent, plus any surcharges. However, he said that has resulted in almost no change in premiums. As a result, he said, the insurer remains a low priced option in many areas around the state.

“Overall the rates are falling behind private carriers and the gap is widening,” he said.

Consumer Advocate Robin Westcott, however, maintained the glidepath is working and that Citizens rates are closer to being actuarially sound than is generally thought and that more will be raised in the next several years.

“Consumers need to know that the dynamic is changing,” she said. “In the next two to three years will we see many consumers come into the personal lines account at a sound rate.”

The sinkhole portion of the insurer’s filing came in for special attention given reforms passed in 2011 that narrowed the definition of a sinkhole while requiring a professional appraisal of the damage. Citizens Chief Financial Officer Sharon Binnun said the sinkhole reforms are having an impact, although the insurer still faces a substantial rate need to pay claims. In 2011, Citizens collected $51 million in sinkhole premiums, but received $445 million in claims.

Regulators also questioned Citizens’ choice of computer model to estimate its potential catastrophic losses. “It looks like you used the model based on the highest indication and that point needs to be made,” said Insurance Commissioner Kevin McCarty.

Regulators were not the only ones lined-up to criticize Citizens, which has confronted public criticism on its mitigation inspection program, broad reductions in coverage, and the recent disclosure of expenses by top executives.

Rep. Mike Fasano (D-New Port Richey), said the mitigation inspection program is an example of the insurer making an end run around the ratemaking process by unilaterally instituting changes that increase premiums. According to Citizens documents, as of July 31, the insurer has conducted more than 247,000 home inspections, out of which 74 percent result in an average increase of $600. Those inspections have boosted the insurer’s premium collections by $154 million. “They have already gotten a rate increase and they got it without your permission,” said Fasano.

Topics Florida Trends Carriers Pricing Trends