Citizens Board Agrees to Increase Florida Rates; OIR Approval Necessary

Home insurance rate increases as high as 31 percent for some properties, were approved Nov. 17 by the board of governors of Citizens Property Insurance Co., Florida’s insurer of last resort,
and now have to go to the Office of Insurance Regulation for approval. State-wide, the average rate increase for a comprehensive policy with all benefits, including wind coverage, for a single-family home will be 13.4 percent.

Experts say approval by OIR is all but assured given that many private insurers have been dramatically raising property insurance rates in Florida and Citizens is mandated to charge the highest rates in the state. If approved, homeowners could see increases starting Feb. 1.

According to the Tampa Tribune, some of the highest rate increases in Florida were approved for in Hillsborough and Pinellas counties. Citizens also approved new surcharges for homes more than 21 years old.

The board approved rate increases of 16 percent in Tampa, 24 percent in the rest of Hillsborough County, 9 percent in Pasco County, and 16 percent to 31 percent in Pinellas County, depending on a property’s
location.

The 31 percent premium rate increase for parts of Pinellas, where Citizens holds 60,000 policies, is the second highest rate adjustment the board approved statewide. The increase for Hillsborough County, excluding Tampa, is tied with Glades County as the state’s third highest. Citizens has about 21,000 policies in Hillsborough.

The Daytona Beach News reported that coastal residents in Volusia County can expect their rates to increase by more than 15 percent due to Citizens decision.

But averages always have a high end, beachside homeowners in Volusia who have windstorm coverage from Citizens will see a 47.4 percent increase, the largest jump of any area in the state, Citizens spokesman Justin Glover, told the News.

On average, the increase will cost customers in Volusia County’s beachside area an additional $288 a year, although their actual costs will vary widely, depending on factors such as home values and construction types, Glover explained.

Citizens Executive Director Bob Ricker said Citizens “clearly” will run another deficit due to damages from Hurricane Wilma. Although the amount is unclear, he said models have indicated the deficit could lead to an assessment of as much as 11 percent on property insurance bills.

Flagler coastal homeowners with windstorm policies will get off easier with only a 2 percent jump.

As of the end of September, Volusia and Flagler counties had about 23,000 policies in Citizens, a relatively small amount compared to areas such as South Florida.

But the increases will particularly hit one segment of Volusia customers-those who live east of the Intracoastal Waterway and rely on Citizens for windstorm coverage. Glover said the 47.4 percent increase reflects the need to charge more than private companies.

“This is a competitive analysis,” he said. “It’s based on rates charged by the private market.”

While the beachside area will have the largest percentage increase in the state, its rates will remain significantly lower than areas such as South Florida, Glover said.

Other increases in Volusia and Flagler counties vary, depending on the types of coverage and locations. But generally, Volusia County customers will see double-digit rate increases, while most Flagler customers will see smaller increases.

The board voted to approve the increases despite misgivings among some members that the higher rates will cause financial hardship.

“At some point, people can’t afford it,” said board member Julio Rebull Jr., who cast the sole vote against the proposed rate increases.

Bruce Douglas, Citizens board chairman, said he sympathized with policyholders who will find the new premiums hard to afford, but that the board had no choice.

He said Citizens must charge higher rates than the 20 largest homeowner insurance companies writing policies in Florida. Current rates are “obscenely high in relation to historic rates, but so are the hurricanes, so are the risks,” Douglas said. “When it comes to rates, we have never filed actuarially sound rates. … The rates don’t merit the risks.”

In addition to the premium increases, the board approved a new program that would levy surcharges on homes built before 1985. Those surcharges would be levied on a scale, depending on the age of the house. It would run between 1 percent and 20 percent, depending on the home’s age.

The older the home, the higher the surcharge. Under the new system, homes 10 years old or younger would get a premium reduction off the base rate.

Citizens previously disclosed that all Florida policyholders face special assessments of about 10 percent to cover an estimated $950 million deficit in its reserves from Hurricane Wilma claims. About 105,000 claims have been filed with Citizens since the Oct. 24 storm.

Lawmakers created Citizens to provide coverage in areas where private insurers refuse to sell policies. That means Citizens, which has about 800,000 policies statewide, writes coverage in financially risky areas, such as areas prone to hurricanes and sinkholes.

Also, this month, Citizens board will meet again to consider a second round of property insurance rate increases.

Commission rates

Last May Citizens Board of Governors agreed to change the amount of commissions it paid to agents but Florida insurance agents have complained that the new commissions are not being paid.

Citizens filed revised commission schedules with the Florida Office of Insurance Regulation in May. OIR requested that the filing be withdrawn and resubmitted with the next Citizens base rate filing.

At the Nov. 17 meeting the board approved the implementation of a Top 20 base rate filing for personal residential business (wind-only and multi-peril), including revised commission rates for both personal and commercial lines.

Prior to the board’s adoption of the rate increase, Citizens released the following revised commission rates:

New and renewal personal residential and wind-only accounts will be implemented March 1, 2006, this means that on Jan. 1, 2006, renewals effective March 1 and later will be generated at the new premium and commission rates.

New and renewal commercial multi-peril, commercial and commercial residential wind only accounts will be implemented March 1, 2006, this means that on Jan. 1, 2006, renewals effective March 1 will be generated at the new commission rate.

New and renewal personal residential multi-peril will take effect April 1, 2006, this means that on Feb. 1, 2006, renewals effective April 1, 2006, and later will be generated at new premium and commission rates.

The commission rates, approved May 3, 2005, were: Personal lines multi-peril, new commission, 7 percent, old commission was 5.8 percent; personal lines, wind-only, new commission 10 percent, old commission was 8.9 percent; commercial residential, new commission 12 percent, old commission was 10 percent; and commercial, wind-only, new commission is 12 percent, old commission was 10 percent.