Editorial: Citizens seeks new rates, more homes

OUR POSITION: While seeking higher rates Citizens Insurance is also looking to increase the replacement cost of homes it insures to $1 million.

It's not difficult to imagine Citizens Property Insurance some day becoming the largest, most dominant insurance company in Florida.

But it was never supposed to be this way and lawmakers, if they stick to their promises in the past, won't let that happen. Because, if that did ever come to pass, it could nearly bankrupt the state.

This scenario — while we admit it being quite unlikely — is not just hyperbole. The tremendous growth of Citizens, which was created as a home insurer of last resort, is startling. The assets it is insuring, if they were all wiped out in a major hurricane, would deal a crushing blow to the state which backs up the claims.

Yet, as more insurance companies leave the Florida market, more and more homeowners are calling on Citizens for its cheaper rates and ability to insure homes other companies may not.

If you recall, lawmakers just last year were urging Citizens to rid itself of policies. They feared the company was getting too big. But the growth hasn't stopped.

Citizens will surely have 1 million policies before hurricane season is over at the rate they are growing — adding 100,000 since January this year. Its growth is resting at nearly 11% a year. Consider that Citizens had638,263 policies on June 30, 2021, and 474,630 policies on June 30, 2020, according to data on its website. Now, in July of 2022 it has more than 900,000.

And, what may make matters worse, Citizens is asking to be able to insure homes across the state whose replacement costs would be $1 million. Right now there is a $700,000 cap on replacement costs.

Citizens tried to slow things down by asking the Legislature for a rate increase of 11%.

That amount, however, is nothing compared to 30% and more rate increases private insurers are asking.

That kind of inflation in insurance policies is driving people to Citizens in droves.

Could the state-backed insurer collapse under the mountain of new policies? We don't think the state will let that happen. But what is even more concerning is the cost of defending thousands of lawsuits file against Citizens, which is seeing more than its share of suits that plague the entire insurance industry.

We've written a lot about these suits. Most of them are for new roofs and that cause the state to call a special session for legislators earlier this year where they addressed the issue. But, so far, nothing has slowed down the suits filed — about 20,000 so far just against Citizens.

The insurance industry is facing a tsunami. Lawsuits, inflation and the lack — or high cost — of re-insurance that is bought to cover catastrophic losses are hammering insurers right now. Citizens set aside $400 million to buy more than $4.6 billion in backup coverage this year. But it wound up spending $215 million for about $2.5 billion in coverage.

Answers are elusive. The Legislature tried by barring insurers from refusing to cover some homes solely because of an older roof and putting a limit on how much attorneys can collect in lawsuits against insurance companies. Lawmakers also made it tougher for contractors to solicit homeowners to make an insurance claim. But the impact of those decisions is yet to be felt.

There will be more work for lawmakers to do when they return to Tallahassee in 2023. Meanwhile, hope the hurricanes pass us by this fall.