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Citizens board agrees to lower rates for most, raises for condo owners and coast

For the first time in four years, Citizens Property Insurance wants to lower rates for nearly 70 percent of its customers while everyone else – mostly South Florida condominium owners and homeowners in coastal areas -- will see another year of increases.

The rate changes were recommended Wednesday at the quarterly meeting of Citizens’ Board of Governors and now must go before the Office of Insurance Regulation for final approval.

Base rates vary greatly from policy to policy but, in Miami-Dade County, Citizens is proposing average rate cuts of about 4.3 percent for homeowners with multi-peril policies. Similar policies in Broward will see rates drop an average of 7.3 percent and homeowners in Monroe County will see rates rise 2.6 percent.

For condominium owners in South Florida, however, the rate hikes will continue with average increases of 6.4 percent in Miami Dade, 3.2 percent in Broward and 1.4 percent in Monroe County.  Download 2015 RATES county by county

Rate increases will also occur for many homeowners along the coast with wind only policies held by Citizens. The average increase for wind-only policies in Broward County will be about 5.3 percent and 7.9 percent in Monroe County. The average Miami Dade win- only policies will remain the same.

The lower rates were made possible primarily because of a decline in re-insurance costs and the fact that the state has not faced a hurricane in eight years, Citizens officials said.

“It’s important to recognize that for the first time in many years, Citizens has achieved actuarially sound rates for the multi-peril groups of business,’’ said John Rollins, chief risk officer for Citizens, at the board meeting Wednesday.

State law requires that Citizens rates be what regulators determine are actuarially sound, meaning the cost of the policy is based on the risk, but Citizens is barred from increasing its customer rates more than 10 percent a year.

Homeowners who see their rates rise have rates that regulators have determined are below what they should be charged compared to the risk. Condo units, for example, are being charged an average of 74 percent less than the risk associated with their windstorm policies, Citizens data shows, but no condo owner will be charged more than 10 percent as required by law.

If state regulators approve the board's recommendation, the statewide average decrease for homeowners will be 6 percent and for renters, 22 percent. Condominium owners will see their rates rise an average of 9 percent – with half of them getting the maximum 10 percent hike.. And commercial property owners will see average increases of about 8 percent.

The proposal to lower rates at the state-run insurer of last resort signals a major policy shift in an election year.

Jay Neal, president of the Florida Association of Insurance Reform, a Broward-based coalition of insurance and development companies, said that in the past, when rates were shown to be higher than needed to be actuarially sound, “they would just leave it the way it was.’’ 

But Neal said he was not prepared to blame it on election-year politics.

The Legislature allowed Citizens to raise its rates up to 10 percent a year at the same time it increased incentives to private companies to takeover Citizens policies. The strategy worked and as of May 31, Citizens was down to 928,546 policies, most of which are in six counties -- Miami-Dade, Pinellas, Broward, Hillsborough, Palm Beach and Pasco – from a high of 1.5 million policies two years ago.

As the company shed policies, it used the price differential to discourage new customers from choosing Citizens when policies were comparable.

In a statement earlier this week, Chris Gardner, chairman of the Citizens board, said the board had no choice but to pass on the savings from the low re-insurance costs and hurricane free years.

"We've done nothing more than rely upon the same data we use every year to determine rates, and this year that data indicates a decrease is in order for most of our policyholders,’’ he said.

Tom Lynch, a member of the board of governors, expressed concern that the rate decrease could lead to people choosing Citizens policies over the private carriers, especially if a hurricane hits Florida again.

“In 2007 our rates were the cheapest in the market,’’ he said Wednesday. “My concern is, how fast can we recover if the market changes.”

He suggested that current policyholders be given a rate reduction while new policyholders pay current rates.

Rollins called it “a very valid concern” but he didn’t think Citizens had the authority to charge two sets of rates for the same policy.

Rep. Frank Artiles, R-Miami, a frequent critic of Citizens, said the decision to raise rates hurts homeowners who have to rely on Citizens as their insurer of last resort.

“Citizens board of Governors needs to stop all rate increases until they have controlled their costs,’’ he said in a statement. “Citizens and the previous boards have spent over 1 billion dollars in attorney fees (defense and plaintiff) in the last 10 years.”

The Office of Insurance Regulation sets Citizens rates but uses the recommendations provided by Citizens and its board of directors to guide its decision.

Also Wednesday, the board recommended keeping rates for sinkhole claims steady except in Hernando County, where rates will rise 10 percent.

Citizens President and CEO Barry Gilway also announced Wednesday that the company was delaying a plan to require homeowners with existing policies to opt-out of having their policies taken over by private companies using an electronic clearinghouse.

Citizens had planned to shift policies into the clearinghouse August or September but will now delay the start of that effort until November, at the request of the contractor, Bolt Solutions Inc.

 

Comments

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ed jenkins

The citizens want this horrible concept of taxpayers taking on risks of massive losses through this entity ended once and for all as the provision of insurance and reinsurance is already provided by private companies so there is no need for this entity. Citizens should have market set rates to make their home purchase decisions based on and not distorted prices from a government involved agency.

Can't take anymore

I guess this rate cut will have no benefit for those of us formally covered by Citizens Insurance who were transferred to one of the Brand X under-capitalized, virtually unknown insurance providers in the purge of Citizen's customers over the last several years. I live in a coastal county but over 10 miles from the shore. We get the honor of still paying to subsidize the very wealthy who live in the high risk zones on the beach or on the intracoastal in the special assessments still allowed by the boys in the Legislature.

Bill Thompson

Of course, this sudden decision to lower rates this year by Citizens after 3 years of massive annual rate increases has nothing to do with their boss, the scumbag Scott's, re-election efforts. For 3 years, they have had a campaign of dumping policies onto under-capitalized, non-diversified start-up insurance companies, cutting mitigation discounts, fighting every claim in court and raising premiums massively. Now because the boss man in desperately trying to get re-elected, they decide to throw a few crumbs to the policyholders in order to buy votes. It won't work.

Hmmmm...

Bill Thompson - do you know how it got in such a bad situation? Charlie Crist... he tried to manipulate the market when he first got elected... and it has been an effort to dig out ever since. The down-side of Crist's anti-consumer, anti-homeowner actions was to put greater risk on the taxpayers by burying his head in the sand...

Bill Thompson

It has only gotten worse in the last 4 years since Scott and his cronies have taken over Citizens. Since 2010, my policy was been dropped by State Farm per its agreement with the State of Florida, even though I had been a policyholder for 20+ years. Dumped into Citizens, where premiums have shot up, backdoor increases have been passed on due to reduction in coverages, mitigation discounts have been taken away by bogus "inspections" by inspectors that knew less about building construction than me. The inspection said I had a gable roof when my roofer said it was 100% hip roof, was reversed upon re-inspection. Then policy was transferred into a start-up, under-capitalized, non-diversified, insurance company that had no rating by any financial ratings agency. Four years later, much higher premiums, lower coverage, more risk and the only alternative to Citizens are these start-up under-capitalized, non-diversified insurance companies that will fold up at the first major hurricane. Meanwhile Citizens executives are getting big salaries, taking vacations in Bermuda on policyholders dollars, giving away reserves to capitalize start-up insurance companies that are friends of Scott and have no capital otherwise and executives leaving Citizens to go to work for companies that have contracts with Citizens, which is a conflict of interest. A couple of years ago, the legislature passed and the governor signed an insurance reform law that was designed to bring in a large national insurance company that was already standing by to underwrite policies in Florida. I'm still waiting.

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