Lawmakers Split on Potential Citizens Insurance Increase for New Policies

Jun 8, 2012

Twenty-five North and Central Florida lawmakers have sent a letter to the President of Citizen’s Property Insurance backing the company’s plan to increase rates for new policy holders above a 10-percent cap imposed by the legislature. But a number of South Florida lawmakers say they’ve got legislation ready to file that would block that move.

In 2009 lawmakers passed a measure that lets the state-backed insurer, Citizens Property Insurance, increase rates by 10-percent each year. The idea is to slowly increase the price until it reaches the actuarial rate, or market price. But now Citizens officials say they don’t think that 10-percent cap applies to new policies and are looking to start charging incoming customers the real cost of the insurance. It’s a controversial move, that some say goes against the intention of the law, but Citizens interim President Tom Grady says  it is legal.

"We have done the research and we have checked the legislative intent of the law,” Grady said.

Representative Ritch Workman, who joined several lawmakers in sending a letter supporting Citizens, said he thinks it’s just what’s fair. Workman, a Republican from Melbourne, said Citizens is meant to be the “insurer of last resort,” available for homeowners with no other option. But the company has ballooned to become the largest insurer in the state. Workman said charging the actual cost of the insurance will help to shrink the company and let more competition into the market.

"It was actually state law that Citizens had to be the most expensive insurance on the market. I am still in favor of that type of Citizens. You live on a sandbar, a peninsula, it’s hurricane riddled. There are going to be properties that even Lords of London don’t want to insure. It doesn’t mean we want to depopulate those areas. If you choose to move into a hurricane prone area, there should be an insurance policy available to you, but it may not be and should not be as cheap as a policy that is in the heart of the center of the state," Workman said.

On the other hand, Senator Anitere Flores, a Republican from Miami, said she’s disagrees that just because a property is in the South it’s more vulnerable to hurricane damage.

“So it’s easy to talk in generalities and it’s easy to say, as someone that’s not from South Florida, well you guys should be paying more. The question is, why should we be paying more? What are the facts, what are the maps that show you that it is more vulnerable to be in South Florida when we know that in recent history there have been more hurricanes and larger catastrophes in the inland portions of the state, such as the Orlando area, than in South Florida,”  Flores said.

State Meteorologist for the Florida Division of Emergency Management, Amy Godsey, said it’s true that every area in the state is vulnerable to hurricane damage from hurricane force winds. But she said while the Orlando area faced winds from three separate storms in 2004, South Florida does see more hurricanes overall.

"South Florida usually does get more hurricane landfalls especially when you look at 1950 up to the present time," Godsey said.

Right now, people with Citizens policies don’t pay the actuarial rate, or real cost of their insurance policy. That means if a major storm hits, all Floridians with insurance policies, like auto insurance, could be on the hook to cover the cost of any claims filed.

"We’ve had several years of no major storms, and so everyone is saying hey, man, let’s not raise these rates, we’ve had no major storms. As soon as a category 2 or 3 or 4 hits this state, every insurance policy in the state will be assessed by state law,” Workman said.

That’s why Workman is backing the increase. He says it makes sense to ask new policy holders to pay the real cost of their insurance, so the rest of the state doesn’t have to back them up. But Flores argues her constituents are helping the rest of the state out too.

“There are taxes paid from across the state of Florida, they go up to Tallahassee and so Tallahassee makes decisions as to where and how those taxes are going to be spread out. And of course the majority of those taxes come from the more populous areas. From across South Florida, of course from Orlando and Tampa as well, but mostly from South Florida, and of course those monies are going to go around to subsidize parts of the state that have a much harder time coming up with sales tax revenue to be able to pay for roads for schools etc, etc." Flores said.

Citizens plan is a response to the governor’s request that the company find ways to depopulate in order to reduce the state’s risk, but Flores said she’s ready with legislation to reverse the move if Citizens increases rates above the cap in her area.