Florida Approves Rate Cuts for Citizens Property Customers

September 9, 2014 by

Florida’s insurance regulator has approved rate decreases for policyholders of Citizens Property Insurance Corp.

The approval means for the first time in five years a majority of the state-backed insurer’s 998,800 policyholders will see rates go down on average.

Florida Insurance Commissioner Kevin McCarty approved an overall statewide average homeowners rate decrease of 3.7 percent, which is just slightly higher than the 3.4 percent decrease sought by Citizens.

The 3.7 percent decrease includes an average 6.1 percent decrease for 688,600 homeowners multi-peril policyholders and an average 3.8 percent for 210,000 homeowner wind-only policies.

The new and renewal policy rate changes will begin February 1, 2015.

Citizens President Barry Gilway said McCarty’s decision is the latest in a round of good news about Florida’s property market.

“The bottom line is that today’s approval of recommended rates, with some minor adjustments, reinforces the fact that the property market continues to improve across the board in Florida,” said Gilway.

Regulators deviated from Citizens’ recommendations on several provisions including loss expenses and sinkhole rates.

Regarding sinkholes, Citizens officials said that 2011 reforms had in a short space of time blunted the need for rates to be raised. Among other things, those reforms provided a strict definition of sinkhole damage and created a legal criterion for conducting repairs had stemmed the flow of sinkhole claims.

Citizens has also been trying to settle lawsuits to end legal disputes over sinkhole claims and make sure that a properties are properly repaired. To date, about 755 sinkhole policyholders have agreed to those settlements and only 37 lawsuits have been filed since the reforms.

As a result, Citizens requested only a 10 percent increase for Hernando County, while leaving the rates in other high-risk sinkhole areas such as a Pasco and Hillsborough at current levels.

Gilway, however, still cautioned that trial lawyers are likely to keep testing the sinkhole law. As a result, there is a climate of “so much uncertainty, so many unknowns,” he said.

McCarty focused on that comment as the rationale for denying the proposed increase in Hernando County sinkhole rates.

“In light of Citizens testimony as to the difficulty in projecting future sinkhole losses and the uncertainty of any projected loss costs, the OIR [Office of Insurance Regulation] finds that no sinkhole rate increases are appropriate, including for Hernando County, at this time,” stated McCarty.

Florida Association of Insurance Reform President Jay Neal said that given Citizens data and McCarty’s decision to freeze sinkhole rates, the state “may be experiencing the tail of the sinkhole issue.”

Regulators also responded to a requested by a group called FIRM, Fair Insurance Rates in Monroe County, that any rate hikes for the Florida Keys be delayed. McCarty agreed.

Regulators noted that starting in 2013 FIRM was working with Citizens to complete a detailed study of the property in the county based on its strict building standards. So far, 700 homes have been inspected, but the study has not been complete.

OIR spokesperson Harvey Bennett said that McCarty did not freeze rates until the study of the county’s property is completed but did agree to entertain a rate filing based on that study when it is concluded. Until then, in Monroe County homeowner wind-only policies will increase by 7.8 percent, condominium wind-only policies by eight percent and mobile homeowners wind-only policies by 10 percent.

Other rate changes include ones for multiperil mobile home policies and wind-only mobile home policies. Citizens had requested a 4.3 percent decrease for multiperil mobile home policies, which regulators dropped slightly further to 4.6 percent. Regulators, however, agreed with Citizens when it came to a 8.2 percent increase in wind-only mobile home policies.

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