TALLAHASSEE — Insurance regulators on Thursday accepted a request from Citizens Property Insurance Corp. to raise rates by nearly 11% as policies continue to pour into the state-backed insurer.
The Florida Office of Insurance Regulation held a three-hour hearing on the request, which, if approved, would begin to take effect August 1. It was not immediately clear when regulators will make a decision on the proposed hikes.
Members of the Citizens Board of Governors decided in December to seek a general rate increase of 11%. Actual demand is slightly lower than that, with, for example, citizens asking for an average increase of 10.7% for homeowners’ “comprehensive” policies – the most common type of cover.
Brian Donovan, chief actuary of Citizens, said the statewide average premium for property and casualty policies would rise from $3,044 to $3,371. But premiums in some areas, like Southeast Florida, are significantly higher than the state average.
The request comes amid a turbulent period in the property insurance market, with private insurers seeking steep rate increases and dropping customers due to financial problems. Two insurers, St. Johns Insurance Co. and Avatar Property & Casualty Insurance Co., recently went into receivership due to insolvencies.
Part of the fallout from the problems is that thousands of homeowners turn to citizens every week for coverage. Citizens chairman and chief executive Barry Gilway told regulators on Thursday that Citizens, which was set up as an insurer of last resort, has around 820,000 policies and will exceed 1 million policies by the end of the day. of the year.
“There is no place for this company. The capacity (in the private market) is so limited. … So where should we go? This is about citizens,” Gilway said.
Gilway said Citizens often charges lower rates than private insurers, putting it in a “ridiculous” competitive position. The requested rate increases are effectively intended to reduce the gap between the rates of citizens and private insurers, in an attempt to steer more policies towards the private market.
To do this, however, Citizens is seeking approval for a different approach to setting tariffs. Under state law, Citizens face an 11% cap this year on rate increases, after being capped at 10% in the past.
Citizens applied the 10% cap on an individual policy basis, meaning some policyholders could see increases well below 10% if warranted. But this year’s proposal is designed for increases to be close to 11% company-wide.
Gilway said Citizens had underwriting losses, which essentially means it pays more in claims and expenses than it brings in premiums. This made him dependent on investment income.
“This (the rate proposal) is an attempt, frankly, to reduce the difference between the average private market rate and the overall citizen rate,” he said.
Heads of state have long sought to shift citizen policy to the private market, at least in part because of the potential financial risks if major hurricanes hit the state. But in some parts of Florida, homeowners have no choice but to turn to citizens for coverage.