Citizens debates new insurance rates
By JIM SAUNDERS
Tallahassee Bureau Chief
TALLAHASSEE — When Florida lawmakers approved a major insurance bill this spring, a key part of the debate focused on 10 percent rate increases for customers of the state-backed Citizens Property Insurance Corp.
But as Citizens officials get ready to propose new rates, a company analysis shows many customers should not receive 10 percent hikes — and even could be in line for rate cuts.
The analysis has touched off a debate that could affect the bank accounts of thousands of Volusia and Flagler county residents who have turned to Citizens to insure their homes.
Potential rate changes vary wildly in the analysis, depending on where people live and what type of coverage they buy. In Volusia and Flagler, for example, the numbers indicate a need to raise rates 60 percent for some homeowners and give a nearly 23 percent cut to others.
In passing the bill during the spring legislative session, lawmakers made sure homeowners won’t see rate increases of more than 10 percent a year.
But some Citizens board members are balking at providing rate cuts, pointing to concerns that the insurer does not bring in enough money to cover the risks of a major hurricane hitting the state.
Those concerns stem, at least in part, from numbers that show customers in heavily populated areas of South Florida should pay much more for coverage.
Even with small rate increases or decreases in many areas, the analyses indicate Citizens’ overall rates should go up 44 percent to cover the company’s risks — a concept known as being "actuarially sound."
"My personal opinion, and it is personal, is that we try as hard as we can to achieve financial solvency and actuarial soundness as a company," said board member Earl Horton, who opposes giving decreases and was chairman of two committee meetings this month about the rate issues.
But Steve Parton, general counsel for the state Office of Insurance Regulation, said Citizens is legally required to reduce rates where appropriate.
"To sit there and say that somebody who is entitled to a decrease doesn’t get it, (that) doesn’t cut it," Parton told the Horton-led committee last week.
The Citizens board is required to submit a rate proposal in July to the Office of Insurance Regulation, which will have final say about how much the company charges. Rate changes would take effect in 2010.
The debate comes less than two months after lawmakers passed a wide-ranging insurance bill that set the stage for lifting a Citizens rate freeze that took effect in 2007.
Lawmakers and Gov. Charlie Crist imposed that freeze after eight hurricanes in 2004 and 2005 caused upheaval in the property-insurance market, with rates soaring and private companies dropping policies.
This spring’s bill directed Citizens to charge actuarially sound rates to cover its risks. But in an attempt to prevent homeowners from getting hit with massive increases next year, the bill also limited annual hikes to 10 percent.
During the session, public discussions largely centered on the prospect of Citizens customers receiving 10 percent increases. The bill did not address whether customers should receive decreases.
Many lawmakers and Citizens board members worry that if the insurer does not collect enough money from customers it will face deficits in paying claims after a large hurricane.
If that happens, residents across the state — not just Citizens customers — will have to pay extra insurance charges to cover the shortfalls.
Rep. Alan Hays, a Umatilla Republican who has been an outspoken critic of Citizens’ financial risks, said he would like to see all Citizens policyholders receive 10 percent increases until the insurer has enough money in reserves. He also said it would be "self-defeating" to give rate cuts.
"You’ve got a pot of money that is entirely inadequate if the big storm hits," said Hays, whose district includes part of western Volusia County.
Some members of the Horton-led committee said they also would like to see 10 percent across-the-board increases for Citizens customers.
But with attorneys saying the new law doesn’t call for such increases, committee members came up with an alternative that would include rate hikes up to 10 percent — but also bar rate decreases.
If the analysis showed customers should receive decreases, their rates would not change.
The full Citizens board is expected to consider that proposal July 8. But with Parton saying Citizens needs to pass along rate cuts, it appeared doubtful the Office of Insurance Regulation would approve such a plan.
Citizens staff members suggested allowing rate decreases of as much as 10 percent, which would mirror the 10 percent limit on increases. Parton indicated that might be acceptable to regulators.
Rep. Pat Patterson, a DeLand Republican who chairs a key House insurance committee, said lawmakers might need to re-address Citizens rates to determine how decreases should be handled.
Patterson and Rep. Bryan Nelson, an Apopka Republican who was the House sponsor of this spring’s insurance bill, said they thought some customers might get decreases.
"I knew there were a few out there," Nelson said. "I didn’t know it was going to be as dramatic (as the analysis indicates)."
CHECK YOUR RATE
Citizens Property Insurance Corp. has more than 35,000 customers in Volusia and Flagler counties. It sells different types of policies, with some customers buying comprehensive coverage and others buying only wind coverage. Here are examples of how an analysis says rates should change:
· Volusia coastal homeowners with comprehensive coverage: 19.3 percent decrease
· Other Volusia homeowners with comprehensive coverage: 1.5 percent decrease
· Flagler coastal homeowners with comprehensive coverage: 22.9 percent decrease
· Other Flagler homeowners with comprehensive coverage: 6.3 percent decrease
· Flagler homeowners with wind-only policies: 12 percent increase
· Volusia beachside homeowners with wind-only policies: 8.6 percent increase
· Homeowners who buy wind-only policies and live in South Daytona or between Interstate 95 and the Intracoastal Waterway in Daytona Beach and Ormond Beach: 60.4 percent increase
· Homeowners who buy wind-only policies and live west of I-95 in Daytona Beach and Ormond Beach: 5.9 percent increase
SOURCE: Citizens Property Insurance Corp.