Citizens Insurance: A storm over reinspections, rate hikes [The Miami Herald]
By Toluse Olorunnipa, The Miami Herald | |
McClatchy-Tribune Information Services |
The state-run insurer is using a massive home inspection program -- along with dozens of coverage cutbacks and policy changes -- in an aggressive campaign to bolster its bottom line and reduce its level of risk. The campaign -- which has intensified at the urging of Gov.
For Temple, a 79-year-old retired librarian who lives alone on a fixed income, the premium hike is taking a large bite out of her limited budget.
"I was shocked and I called my agent," she said from her three-bedroom home in
Her insurance premium jumped from
She's not alone.
Temple is one of hundreds of thousands of Floridians who have already been slammed by Citizens' reinspections and other cost-hiking measures. As the state-run insurer intensifies its plans to raise rates and reduce what it covers, the impact on
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Executives at Citizens say the company is in a bind, and has little choice but to raise its rates. It was created 10 years ago to be a safe haven -- the so-called "insurer of last resort"-- but it has ballooned to become the state's largest insurer, with about 1.4 million policies. Most of its risk is concentrated in
"Citizens is too big," Scott has said repeatedly, citing numbers that paint Citizens as a huge potential financial liability for the state. At a Cabinet meeting last year, Scott told Citizens executives to shrink the company, and to do so quickly.
Citizens' board has responded, vowing to help
"There are things we have to do to make Citizens a strong safety net and not a hammock," said board member
He went on to acknowledge: "Some of it will be painful."
Critics, and a growing crop of litigants, say Citizens is pushing the bounds of what's moral -- and what's legal -- as it attempts to slim down. Homeowners in
The state-run insurer is bound by a 2009 law that limits rate increases to 10 percent annually, but it has found several creative ways to raise premiums by 40-, 60- and even 100 percent this year. A Miami Herald/
The dirty word among Citizens policyholders -- reinspections.
Through reinspections, higher estimates of replacement costs and new sinkhole-related charges, Citizens has raised premiums far beyond the 10 percent cap, taking in more money than ever before.
Though the company has been collecting billions of dollars in premiums during the past six hurricane-free years, Scott and Citizens' leaders say it remains severely undercapitalized. If a major hurricane hits the state and Citizens runs out of money, taxpayers will be on the hook to bail the company out through hurricane taxes.
Temple, and other homeowners like her, feel that they've already been hit with a massive hurricane tax, just without the hurricane. Citizens' flurry of policy changes has bred hundreds of millions of dollars in rate increases this year alone. Over time, the pocketbook impact on homeowners will likely reach into the billions.
Though Citizens has typically been governed by the
Citizens' statewide program of home reinspections has led to an unprecedented stripping of insurance discounts worth millions of dollars. (Homes with hurricane-resistant features are eligible for "wind-mitigation discounts" on their insurance premiums.)
The reinspection of more than 200,000 homes has been a boon to the insurer's bottom line. In nearly 75 percent of cases, inspectors are able to find cause for stripping homeowner discounts, producing premium increases of
That translates to more than
With the money from reinspections flowing in -- and the 10 percent cap powerless to limit inspection-related premium increases -- Citizens is rapidly ramping up the program.
"The return investment of this program so far has been about 300 percent,"
Citizens launched the massive reinspection push under the premise that thousands of homeowners had received unwarranted discounts due to widespread fraud. However, only a handful of cases have been referred to
Consumer advocates are crying foul.
"Citizens has gone from incentivizing mitigation discounts to implicating homeowners for virtually non-existent, undocumented fraud," said
In an interview, Lacasa defended the inspections program as a necessary initiative to verify that homeowners who are receiving discounts actually deserve them.
In many cases, inspectors have found discrepancies not because of fraud, but because the state has made rule changes that make it more difficult to qualify for discounts.
In 2010, the
Thousands of homeowners have seen their discounts eliminated as a result of the rule change. Fair Insurance Rates in
For Temple, the combination of the roof rule-change and the reinspection resulted in her losing
Temple's roof is mostly hip-shaped but also has a small flat portion covering a screened porch between her kitchen and backyard. She said an inspector came to her house and determined that the roof over the screened porch disqualified her from receiving a "hip-roof" discount.
She later hired a private inspector to help her appeal Citizens' decision.
"We do find a lot of discrepancies with Citizens' inspections," said
Citizens' new president,
"The public perception of this program is critically important to us," he said.
When an inspector cannot find evidence to validate the discount, the onus is on the homeowner to prove that they deserve the previously awarded credit. In many cases, if a homeowner can't produce decades-old documentation showing that their home has certain wind-resistant features, Citizens removes the discount, resulting in a premium hike.
Company leaders have openly stated that wind-mitigation discounts -- which were doubled in 2007 under Gov.
"We have
The company recently expanded the inspection program to condo buildings, and plans to inspect thousands of buildings across the state.
As premiums rise, Citizens has also drastically reduced what it covers, leaving some homeowners more exposed.
Citizens has dropped coverage for carports and screened enclosures, reduced its personal liability coverage from
Those and other changes have slashed billions of dollars from the insurer's exposure, and will force homeowners to pay more if a hurricane hits.
Homeowners like
Donly, who owns property in
"I couldn't even tell you what the bill is for this year," she said. "I took one look at it, and I burned it."
This article includes comments from members of HeraldSource, part of the Public Insight Network. To learn more about the network or to join, visit MiamiHerald.com/insight.
Toluse Olorunnipa can be reached at [email protected] and on Twitter @ToluseO
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