Citizens Property Insurance Corp. will explore charging new customers potentially much higher rates but backed away from final approval Thursday following push-back from consumers, lawmakers and state officials.
Following debate and public testimony, Citizens’ board of governors, meeting in Tampa, directed staff to work up a package of proposed rates for 2013 that includes allowing the state-backed insurer to charge new customer premiums that more closely meet actuarially sound rates.
The board had initially been slated to vote on a proposal to allow the company after Jan. 1 to charge new customers rates that were more than 10 percent higher than existing rates that in some cases.
Under whatever scenario the company moves forward, existing policyholders will continue to be protected by a 10 percent cap on premium increases.
But new policies should be higher, the company says.
“In plain language, a new policy is not subject to the cap,” said Citizens Chairman Carlos Lacasa.
Dan Sumner, Citizens general counsel, defended the insurer’s proposal, saying the Legislature’s underlying intent was for Citizens to become less a player in the property insurance market, which cannot happen as long as the rates remain artificially low – because industry officials say private insurers are less willing to enter the market.
Sumner said residential rates are 43 percent of what they should be. Commercial rates are even less adequate, falling about 75 percent short.
“The threshold guidance from the Legislature is that Citizens is to have actually sound rates,” Sumner said. “There is, in fact, what we call the glide path, a specified exception to the mandate for actuarially sound rates.”
Critics contend the state-backed insurer is “the only game in town” for its nearly 1.5 million policyholders.
To subject new customers to potentially much higher rates would not only hurt new home buyers but existing homeowners who get cancelled by their private insurer.
“You can get all the rhetoric that you want, but the private companies are not coming back to some areas of this state, they’re just not,” said Sen. Mike Fasano said, R-New Port Richey. “Study or no study, if this is pushed or approved you will hurt our economy.”
Lawmakers in 2006 froze Citizens rates following the 2004 and 2005 hurricane seasons, which prompted a surge in claims and led some companies to leave the state, pushing more customers into Citizens.
In 2010, the Legislature, under the leadership of Senate President Jeff Atwater, agreed to cap premium hikes at 10 percent, a level far below what industry officials said was necessary to bring the rates up to private competitors.
In a letter to the board, Atwater said the recommendation went beyond the scope of the 2010 legislation. OIR also said it would look closely at any request, but has yet to see a formal rate request.
Thursday’s action brought applause from Sean Shaw, a former Florida insurance consumer advocate who now works with a law firm that represents homeowners.
“Citizens thought they could slide this outrageous rate hike through without policyholders or lawmakers noticing – and they were wrong,” Shaw said.
By Michael Peltier
