MIAMI — The governing board for Florida’s state-backed Citizens Property Insurance Corp. will consider proposals to more than triple insurance rates for sinkhole coverage in some areas next year and boost premiums for new policyholders, drawing criticism from homeowners associations.
Homeowners in some parts of the state could see significant increases in high risk areas if the sinkhole rate hike is approved, jumping premiums from $1,382 to $4,179 a year on average in Pasco County. By comparison, Alachua County would only see a small increase from $55 to $62 a year. The insurer had a net loss of $968 million in sinkhole claims between 2007 and 2011.
Citizens also said it needs a 15.2 percent increase for homeowners policies statewide and new residents, but will only ask for 7.5 percent because of the 10 percent cap currently in place. A Citizens spokeswoman said she thought the board would consider capping the rate and gradually phasing in the increase.
Homeowners who attended Monday’s public meeting criticized the insurer for continuing to raise premiums while lowering coverage.
“You’re supposed to be the insurer of last choice. Tell me where I can get insurance in Monroe County … nobody has an answer for me,” said Edward Smith, who represents condo owners in the Florida Keys, an area vulnerable to hurricanes.
Citizens has grown to become the largest property insurer in Florida with more than 1.4 million policyholders. The threat of hurricanes has scared off many private insurers while others in many cases have raised premiums higher than homeowners and businesses are willing to pay.
Citizens’ governing board, led by new CEO Barry Gilway, will vote next week on what rate increase it will request from the Office of Insurance Regulation. The board is moving toward shedding thousands of policies.
But there is heavy political dispute among state leaders about Citizens’ future. Gov. Rick Scott and many lawmakers insist on having actuarially sound rates. Scott contends the company’s rates are artificially low, which could leave policyholders on the hook to make up the difference if the insurer can’t pay all claims should a major storm hit the state.
Other lawmakers warn such rate shocks would be detrimental to the state’s economy and worry that property values could plummet if homeowners can’t find insurance.
“I think it took a long time for Citizens to get to where it is and it should take a long time to wind it down. You can’t wind it down overnight and I’m not going to participate in any kind of a vote on rates that are going to put people out of their homes,” said board chairman Carlos Lacasa.
One of the few things all parties seem to agree is that the company must be dramatically downsized. At one point earlier this year, there was talk that Citizens’ might ignore the 10 percent legislative cap on rate increases to reach actuarially sound rates.
Gilway said he wants to give independent insurance agents a larger role in placing tens of thousands of Citizens’ contracts in the hands of private commercial carriers. He also doesn’t foresee boosting insurance rates by more than 10 percent for existing policyholders without legislative change, with the possible exception of sinkhole policies and new business.
Florida House Majority Leader Carlos Lopez-Cantera criticized Monday’s proposal, saying it was “outside the scope and power granted to it by the Legislature.”
State law says Citizens should increase rates that do “not exceed 10 percent for any single policy issued by the corporation” with the exception of sinkholes and increases related to coverage changes or surcharges.
The Miami Republican said his office has received complaints that Citizens’ inspectors are taking away credits that homeowners had accrued and warned that many of Citizens customers are on fixed incomes.
Barbara Zee, spokeswoman for Community Advocacy Network, read a letter from a Port St. Lucie man who lives in a $150,000 manufactured home. The letter said he was telling his friends not to move to Florida for lack of affordable homeowners’ coverage.
Only a handful spoke during public comments and most were from advocacy groups or part of the insurance industry, not homeowners.
“It’s going to be a significant balancing act,” said Gilway, a 42-year veteran in the insurance marketplace. “I found myself nodding in agreement with most of these issues. We are certainly well aware of the impact (rates) have on current customers and additional customers.”