The board that oversees Florida’s largest property insurer has dropped a plan that would have allowed the company to impose higher rates on new policies. Lynn Hatter reports Citizens Property Insurance Corporation is looking for ways to reduce its liabilities and shore up its reserves.
Citizens Property Insurance Corporation is allowed to raise rates on existing policy holders, but the hike is capped at 10-percent a year. State law doesn’t address new policies, and the board sawthat as a place where it could charge rates more in line with private insurance plans. Board member John Rollins said the move was needed to make sure Citizens could pay for all its bills.
“Citizens didn’t grow to the economic threat and the taxpayer risk it represents now, overnight. and it didn’t do so alone. It took a lot of actions over a long period of time by a lot of Floridians, elected leaders, previous boards, insurance companies and others to get here. And it will take patients and work to get out…to rebuild our safety net.”
Many private companies stopped issuing policies after the 2004-2005 hurricane season. Citizen’s is backed by the state, and its rates are much lower than what a private insurer would charge, but those rates aren’t enough to cover all its liabilities.
The company has been working for several years now to shore up its accounts and shrink its influence in order to lure back private companies. But it’s latest plan to do that—the rate hikes on new customers-- received pushback from state officials and lawmakers, like Senator Mike Fasano of New Port Ritchey who say it won’t help the situation.
“We’d all love to see the depopulation of Citizens. But guess what, the private companies aren’t coming back. The private companies said the reason they won’t write in Pasco and Hernando is because of the sinkholes. So we changed the law. But guess what? How many private companies came back? Zero. None.”
Fasano says the legislature intent in capping policy rates, includes ALL policies, new and existing. But the Board’s General Counsel, Dan Sumner, says that intent isn’t clear in the law.
“The reasoning we are traveling under is that a rate increase would only be applicable to a renewing policy. A new premium, under any definition of insurance terminology is used, a new premium for a new policy holder is not a rate increase, it’s a new rate.”
The company wants to reduce the number of policies it has by 400,000 within the next year and a half. It says the reduction in liability is essential for its financial survival. Citizens says it continues to see problems within its sinkhole policies-- for every dollar it brings in in premiums, it’s spending $10 in claims—something, that, if not addressed, could mean extra assessments for customers.
