The chair of the Florida House’s Insurance and Banking Subcommittee floated the option of raising the cap on rate hikes on Citizens Property Insurance customers to 13 percent Tuesday.
Rep. Bryan Nelson, R-Apopka, said homeowners would be willing to pay an additional 3-percentage points if it would reduce the possibility of potential “hurricane taxes” after a catastrophe.
The cap, currently at 10 percent, has been in place since 2009, and followed a freeze on all rate increases under then-Gov. Charlie Crist.
Citizens President, Barry Gilway, speaking before the Insurance and Banking Committee on Tuesday said getting higher insurance rates is the most direct way to shore up Florida’s private market.
“We talk about the need to get outside competitors coming in, back in, to Florida,” he said. “And we’re going to be talking about many different approaches to depopulating Citizens. But creating a competitive marketplace in Florida, basically comesdown to creating competition.”
Gilway said Citizens has been undercutting the private market with below-market rates, but that the 10-percent “glidepath” on rate hikes should not be completely stripped because that would devastate parts of the state.
He said it is up to the Legislature to decide how large of an increase in rates should be appropriate. Gov. Rick Scott has agreed that Citizens is undercutting the market with too-low rates but has not weighed in with any specific proposals for how much rates should increase.
Nelson said he would be looking at raising the cap from 10-percent to 13-percent.
“I think (an additional) three percent makes a lot of sense,” he said, pointing to a statewide study showing support for the proposal.
For a homeowner with a $2,000 annual premium, it could mean an additional $60 or so in new annual costs. The proposal could face backlash from lawmakers in parts of South Florida and Tampa Bay, where insurance rates are highest.
Even without a new higher rate cap, premiums are set to go higher for Citizens customers.
Regulators approved by a state-wide average increase of 10.8 percent for 2013. Citizens also instituted a statewide home reinspection program of 374,000 homes that led to premium hikes of $200 million.
Gilway also said that Citizens has commissioned a new study of wind mitigation credits that indicate that homeowners are getting discounts that are too large.
When the study is completed, it could mean smaller discounts and higher premiums.
The study “shows a significant need for a significant reduction in the amounts of credits that are being applied today,” said Gilway.