Citizens Insurance proposes average 14% statewide rate hike [South Florida Sun-Sentinel]

State-owned Citizens Property Insurance Corp. is on a mission to raise its rates as high as state law allows — because officials want you to get your insurance on the private market.

But private market companies are still raising rates, too, and that might leave Citizens as the most attractive option for many homeowners even if its latest rate-hike proposals are approved by state regulators.

On Tuesday, the so-called insurer of last resort released a proposal to raise rates for personal-lines policies an average 14.2% statewide over the year beginning Nov. 1.

If approved by the company’s Board of Directors on Wednesday, and then by the Florida Office of Insurance Regulation (OIR), rates would rise in two separate phases as the capped rate of increase allowed under Florida law rises from 12% to 13% for owners of primary homes.

Rate increases for vacation homes or investment homes are now capped at 50%, which is why some counties will see average rate increases exceeding 12% and 13%.

From Nov. 1 to Dec. 31, the cost of new or renewing coverage of a single-family home in Florida would increase by an average of 12.7%, from $3,285 to $3,702. Condo owners would see their costs go up 12%, from $1,471 to $1,638.

In Broward, the cost to insure a single-family home would increase by 12.2%, from $4,726 to $5,302, and by 12.6% for condos, from $1,385 to $1,560.

The cost of the average homeowner policy in Palm Beach County would climb by 12.9%, from $4,216 to $4,761. Coverage for condos would increase 11.4% from $1,675 to $1,867.

And in Miami-Dade, premiums for standalone homes would increase 11.9% from $4,579 to $5,125. Coverage for condos would increase just 7.8%, from $1,553 to $1,674.

The second phase would kick in on Jan. 1, when the cap on annual rate increases for coverage of primary homes goes from 12% to 13%.

Without the cap, Citizens’ rates should be increased by 58.5% to achieve “actuarial soundness” sought by profit-seeking entities, Citizens said in a news release. But Citizens makes money off about $6 billion in reserve, which enables it to operate at a loss and remain solvent.

The statewide average 14.2% hike announced by Citizens on Tuesday would be the largest average increase since former Gov. Charlie Crist limited annual increases to 10% in 2009.

State insurance regulators still must approve Citizens’ requested increases. Last year, Citizens sought an increase near the maximum allowable under state law but regulators approved a smaller hike, saying the company failed to provide rate decreases to homes that deserved them.

This year, a provision in a legislative bill approved in December calling for Citizens to avoid offering competitive rates should justify approval of rate hikes for most Citizens customers, company spokesman Michael Peltier said.

“These recommendations will go before OIR, and OIR will respond accordingly,” he said. “We think the changes [to state law] approved in December will provide justification for the recommendations we’ve given.”

Over the past two years, Citizens has seen its policy count increase from 421,155 in 2019 to 1.2 million today. Rising private-market rates, numerous insurance company bankruptcies, and decisions by surviving companies to stop writing new business in Florida has made more and more policyholders eligible for Citizens.

Last December, Citizens’ then-president and CEO Barry Gilway told the company’s Board of Directors that Citizens’ average premium of $3,227 was 44% lower than the $5,788 average that the private-market customer pays.

Citizens officials and state legislators worry about the company becoming too large and triggering statewide surcharges if it cannot pay off all claims after a national disaster.

In an effort to reduce its policy count, Citizens has pursued changes in state law intended to reduce the number of homeowners who can get coverage, and force them into higher-cost private companies.

In addition to increasing the annual 10% rate-hike cap by 1 percentage point each year until it gets to 15% in 2026, recent changes to state law removed the low cap for investment and vacation homes. Rates for those properties can now swell by to up to 50% a year.

That higher rate-hike cap is why Citizens’ proposed average statewide increase of 14.2% beginning Nov. 1 is higher than the 12% cap for 2023 and 13% for 2024.

Other changes intended to push policyholders out of Citizens include a new requirement that customers leave the company if a private market offer comes in that’s not more than 20% higher than the existing Citizens premium. Prior to that change, existing customers could remain with Citizens if no company made a lower offer for identical coverage at the annual renewal period.

It remains to be seen how effective the new requirement will be at reducing Citizens’ policy count.

Few customers have been removed from Citizens because of the new requirement, Peltier said, probably because few private market companies are offering them coverage.

Although Citizens’ 14% rate hike would be its highest of the past 14 years, private market companies are also seeking hefty increases, which could prevent a large number of Citizens customers from becoming ineligible.

Despite two rounds of legislative reforms last year that were intended to reduce insurer losses — and policyholder premiums — by making it harder to sue insurers over claims disputes, private market rates are still expected to increase significantly this year.

That’s because savings from the reforms aren’t expected to start showing up on companies’ balance sheets until later this year, and because losses from hurricanes Ian and Nicole last year are expected to again raise the price that insurers must pay for reinsurance — the coverage they must buy to ensure they can pay all claims after major storms.

Kin Interinsurance Network, a company started by tech entrepreneurs that relies on publicly available data to set pricing for homes in risky states, swiftly grew into one of the state’s top 20 insurers and had 101,098 policies by the fourth quarter of 2022, according to data collected by the Florida Office of Insurance Regulation.

Kin is seeking retroactive approval of a 61.5% rate increase for its multiperil homeowner policies and a 103.2% hike for similar condominium policies that were imposed last July, according to a news release for a March 30 public hearing before state insurance regulators. Seeking approval after charging the increase is permissible under a provision known as “use and file.” If regulators approve a smaller rate increase, Kin will have to refund the disallowed percentage.

First Community Insurance Company, with 25,000 policies, is seeking a 44.8% rate hike at the same public hearing.

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at [email protected].