News & Updates


Citizens Insurance Rate Increase Battle Brewing

Published: Tuesday, June 23, 2009 at 12:32 a.m.
Last Modified: Tuesday, June 23, 2009 at 12:32 a.m. 

TALLAHASSEE | Thousands of homeowners across Florida may wind up getting vastly different rate increases from the state’s largest property insurance provider, and not the 10 percent increase many may have been expecting.

Such discrepancies threaten to spark a battle between Citizens Property Insurance Corp. and state regulators over what kind of rates homeowners should wind up paying.

A top official for the Office of Insurance Regulation told Citizens officials Monday that some homeowners should get a rate decrease early next year instead of paying more.

The confusion stems from a recently passed law.

State lawmakers, worried about Citizens’ ability to pay claims in the event of a major hurricane, ended a three-year-old rate freeze. The new law signed by Gov. Charlie Crist capped future rate hikes at 10 percent for all policy holders until Citizens is on sound financial ground.

But at the same time, Citizens – which has more than 1 million policyholders – is also required by state law to charge rates based on its potential losses.

And that is the problem: The complex hurricane models used by Citizens shows that some customers are paying too much, such as homeowners in Sarasota and interior Manatee County who have comprehensive coverage.

By contrast, the models suggest that some Charlotte County homeowners should pay 10 percent more and that Manatee County homeowners with only hurricane coverage should pay 9.4 percent more.

Those same models also show wide ranges for other parts of the state, with huge rate increases needed for South Florida – where the bulk of Citizens customers reside – while large rate decreases are justified in coastal counties such as Duval and Escambia.

A Citizens panel on Monday voted, however, against authorizing any rate cuts right now. Instead, those customers eligible for a decrease would have their rates frozen. Citizens would raise rates up to 10 percent for other customers.

The full board that runs Citizens is expected to give a final up-or-down vote this Friday on the proposed rates.

Earl Horton, a retired insurance executive who sits on the board that runs Citizens, defended the move, saying that Citizens is still pulling in $1.6 billion short of what it needs to be financially sound.

Under Florida law, if Citizens doesn’t have enough to pay claims, it can recoup its losses by tacking on additional charges on most insurance policies, including auto insurance.

But Steve Parton, general counsel for the Office of Insurance Regulation, sharply disagreed with Citizens board members. He told them during a conference call that if rate payers deserve a decrease they should get it, or Citizens would breaking state law.

Any rate request must go through the Office of Insurance Regulation, which can reject it or modify it. Citizens is supposed to submit its 2010 rate filing next month.