Florida’s Citizens Delays Decision on Proposed Rate Increases

Florida’s Citizens Property Insurance Corp. will wait until December to determine its 2019 insurance rates and whether it will approve a proposed 7.9 percent statewide increase for homeowners policies.

The decision to defer action on the 2019 proposed rates came at last month’s Board of Governors meeting, where the board opted to give new water loss policy language changes time to take effect and South Florida policyholders more time to recover from Hurricane Irma, according to a statement from the state insurer of last resort.

Citizens said deferring the decision will allow the company to review initial results of a newly established managed repair program that kicks off Aug. 1, 2018. The program was created to address rising costs linked to water-loss claims, assignment of benefits and increased litigation.

Acknowledging concerns raised by consumer advocates and state leaders, the board voted unanimously to defer action on a proposed 7.9 percent statewide increase for personal lines policyholders – homeowners, condominium unit owners and renters – which would have taken effect on Feb. 1, 2019.

Under the proposed rates, inland homeowners with multiperil policies would see an average increase of 8.3 percent, while homeowners along the coast would see rates climb by an average of 9.5 percent. Commercial lines would increase by an average of 8.9 percent.

The 2019 proposed rates called for increases in homeowners multiperil premiums in 60 of 67 counties. Citizens said the statewide rate increases are being fueled largely by increased litigation associated with water damage claims and AOB abuse. In Southeast Florida, Citizens Chief Actuary Brian Donovan said the litigation rate is around 50 percent. He said that rate has flattened out after years of increasing, though the reason for that is unclear.

This is the first year many policyholders outside of Southeast Florida could see rate increases, as AOB and water damage claims abuse appear to be spreading to other parts of the state, Donovan told the board. He said the litigation rate outside of Southeast Florida has increased from the single digits to 15-to-17 percent.

“In the past couple years, these policyholders actually have been receiving rate decreases,” he said. “However, due to the increase in litigation, this year the recommendation is to increase the rates in that region.”

Florida Chief Financial Officer Jimmy Patroni sent a letter to board members acknowledging the actuarial need for the 2019 proposed rates but urging board members to defer action in an attempt to cushion Hurricane Irma victims and address non-hurricane related losses without impacting rates for Citizens policyholders.

Patronis added Citizens analysis shows the cause of the rate increase is because AOB reforms have not been complete, “which means rising fraud and litigation drive up costs at Citizens.”