THE CAPITAL, TALLAHASSEE, July 17, 2012
Jim Saunders and Michael Peltier, The News Service of Florida
Gearing up for next week's meeting to approve rates, the Citizens Property Insurance Corp. Board of Governors met Monday to discuss rates for the state-backed insurer.
As the company – the state's largest property insurer - tries to reduce its number of customers and shore up its premium base, the board also took public testimony during its workshop in Miami. And it got an earful from policyholders and local lawmakers that underscored the difficulty it faces in raising rates on some of the riskiest property in the state.
Lawmakers have capped premium increases on existing Citizens policyholders at 10 percent, avoiding rates that actuaries say could otherwise be more than 30 percent higher if market pricing were in place.
Figures prepared for Monday's workshop show that rates would need to be increased by at least 27 percent on average statewide next year to more accurately respond to non-sinkhole risks.
State law however, restricts rate hikes to no more than 10 percent on any individual policies.
Some Citizens policyholders may even see no increase next year, though most will see some sort of increase.
Citizens remains less expensive than private insurance alternatives in certain areas – which keeps the private market from being competitive. The company wasn't originally designed to be a cheaper alternative to private coverage, it was supposed to be an emergency alternative for people who couldn't get private coverage. But with the cap on rates, it's become the cheapest option in some places.
"This means that Citizens is a rate competitor with private insurers in many territories where Citizens should be working to reduce exposure and be noncompetitive," Citizens staff wrote in an executive summary of the proposed rates.
Sinkhole coverage is another area of concern. Lawmakers have removed the 10 percent cap on sinkhole premium increases, and it is virtually assured that Citizens board will increase the rates on sinkhole coverage to the degree necessary to make them actuarially sound.
To do that, the rates would have to more than triple for homeowners in Citizens most populated insurance pool. The board is instead expected to approve a phase-in of higher sinkhole rates.
Citizens officials have tried to make the case that the 10-percent cap should not apply to new business, arguing new commercial and residential policies should be priced at rates higher than what rates would be if the cap were taken into consideration.
The political pushback was evident Monday as board members met with citizens and local lawmakers during a public workshop in Miami. State Reps. Carlos Lopez-Cantera, and Frank Artiles, both Miami Republicans, said many South Florida residents have little choice but to get coverage through the state-backed insurer.
Lopez-Cantera urged the board to remember that many residents are on fixed incomes and said insurance "is not a luxury, it is a requirement" for people who have mortgages.
"The decisions you make affect people that you may not think about,'' said Lopez-Cantera.
While the board heard from the public, its actuarial committee approved changes made by lawmakers earlier this year to reduce costs.
Among a list of changes, the panel approved caps on water damage payments, a higher deductible for hurricane claims and even higher optional deductibles for policyholders who choose to reduce their premiums by taking on more of the financial risk.
The full board meets July 27 to vote on rates, which must then be approved by the Office of Insurance Regulation.