Citizens Property Insurance to set rates today
By PAUL FLEMMING • news-press.com Capital Bureau • July 8, 2009
TALLAHASSEE – Citizens Property Insurance leaders today will decide how to set new rates while questions remain about who has final word and if any option will end up in court.
State-run Citizens’ rates have been frozen by the Legislature for three years. In January, the largest property insurer in Florida is supposed to begin charging rates that support possible losses for the $415 billion in risk it covers. Legislation passed earlier this year caps increases at 10 percent a year, but doesn’t say anything about 80,000 policies that computer models say deserve rate cuts.
A committee of the Citizens board recommends 10-percent caps for increases on a million policies and rate freezes for those that might otherwise get rate cuts.
"It’s very fair to say that after the next board meeting, somebody’s not going to be happy," said Citizens board Chairman James Malone.
In 2007, lawmakers changed Citizens’ rate-making process and gave final say to the Florida Office of Insurance Regulation, without recourse through an appeal private companies may pursue.
Jeff Grady, president of the Florida Association of Insurance Agents, said his group favors the proposal before the board to deny rate cuts and believes Citizens’ board is given the explicit right to do so without review by Insurance Commissioner Kevin McCarty.
"Some people say that’s not being fair to those folks. If they feel as though they’re getting charged the wrong rate there’s a whole other world out there called the private market," Grady said.
Office of Insurance Regulation staff and lawyers maintain they ultimately set Citizens rates.
Grady said the insurance office is more inclined to decrease rates for policyholders in areas that call for lower premiums, for political reasons, than the Citizens board, which has a fiduciary responsibility to the company’s economic health.
Sen. Dan Gelber, a Miami Beach Democrat who voted against the Citizens bill because he favored lower caps on increases, wrote a letter this week to Malone and other board members urging them to approve indicated rate cuts.
"If the goal of increasing rates is to seek actuarial soundness, then rejecting rate decreases intended to reach that same goal is neither fair nor equitable," Gelber wrote in a letter to Malone and the Citizens board.
Grady said the possibility of lawsuits also could affect the board’s decision.
"There’s some argument within the Citizens boardroom that if they were not to offer a decrease, those entitled to a lower rate are going to sue," Grady said, noting private insurers may have a legal beef as well.
"The threat of lawsuit works both ways," Grady said.