Citizens customers won’t pay as much as feared
Article Courtesy of The Sun Sentinel
By Ron Hurtibise
April 21, 2021
Customers of Citizens Property Insurance Corp. can
rest easy, at least for another year. Your rates next year won’t go up
as much as the company wanted.
Insurance regulators rejected efforts by state-owned Citizens to deter
new customers by raising rates higher than previous rate-setting methods
would have allowed.
As a result, new and renewing customers, a majority of whom are in
Broward, Palm Beach and Miami-Dade counties, will see lower increases
than proposed in January, and thousands will actually see their premiums
Insurance agent Dulce Suarez-Resnick, vice president at Acentria
Insurance in Miami, welcomed the Office of Insurance Regulation’s order
to reject Citizens’ proposed hikes.
“In this current market condition, we didn’t need that rate hike,” she
said by email. “We should not be trying to find ways to keep people
The order by state regulators reduces the 6.2% average rate increase
sought for multi-peril homeowner policies, the most common type, to
3.2%. The average increase for homeowners wind-only policies was reduced
from 7.0% to 5.1%. Rate increases for condominium owner policies were
reduced from 7.8% to 4.8%. The new rates will take effect Aug. 1 for new
and renewing policyholders.
While average increases by county were not released with the order, they
will be closer to what the company proposed for single-family homeowners
late last year: $182 in Palm Beach County, $99 more in Broward County
and $26 more in Miami-Dade County.
Citizens was created to serve as an insurer of last resort for Florida
property owners who cannot find a private-market company willing to
insure them, or can only find private-market coverage at exorbitant
rates. In recent years, insurers have raised rates by up to 40%, blaming
increased claims costs and litigation. Many companies refuse to sell new
policies in South Florida.
As a result, Citizens is growing by about 5,000 policies a week and
could reach 700,000 policies by the end of the year — up from 452,000 in
Citizens, the so-called insurer of last resort in Florida, last December
unveiled a proposal to raise rates for its personal lines accounts by an
average 3.6%, including an average 1.6% hike for its homeowners
Then in January, the company’s board of governors, led by newly
appointed chairman Carlos Beruff, ordered the company’s actuaries to
find strategies justifying steeper rate hikes. Beruff said he was
concerned about the accelerating number of policies at Citizens and the
increased vulnerability of all insurance consumers in the state who
would be forced to pay surcharges if Citizens ran out of cash paying
claims after a catastrophe.
So in January, the board approved new recommendations that increased the
average rate increase to 7.2% and eliminated rate decreases for 40,096
In its order released Tuesday, the Office of Insurance Regulation
ordered Citizens to increase rates by an average of 3.2%. The order
rejected Citizens’ justifications for the larger rate hikes, including:
Citizens’ rationale for not reducing premiums for customers whose
circumstances in other years justified reductions. Those rates should
continue to be set by methodology used in prior years, regulators said.
A recommendation to subject new customers to rates that would be charged
if Citizens were a private-market company rather than rates that
increase no more than 10% each year as required by state law. Board
members, along with Sen. Jeff Brandes, argued that state law allowed
Citizens to charge new business rates that more accurately reflected the
cost of their risk, but the regulators found that justification
“insufficient.” When the 10% cap was initially recommended in 2009,
there was no distinction between new and renewal rates, the order
Citizens’ decision to inflate rates using a “risk factor” calculation
intended to reflect “the cost of catastrophic risk that Citizens is
assuming. Regulators found the justification is “insufficient and should
be removed from the rate determination.”
Ryan Papy, president of the Keyes Insurance agency in Palmetto Bay, said
the reduced rate increase widens the price gap between Citizens and
private market insurers and will compel more customers into Citizens.
Ultimately, that’s not good, he said.
“We need the private market to be able to compete to have a healthy
property insurance industry,” he said. “The current state of affairs is
unhealthy. Very few, if any, private market carriers are writing new
policies on properties more than 10 years old. A market with no options
is no longer a market.”
Despite the rejections, an effort to dissuade new customers from
switching to Citizens remains alive in the state Legislature. A bill
facing the House Commerce Committee on Friday would enable consumers to
buy Citizens insurance only if available private market insurance costs
at least 20% more than Citizens. Under current law, the difference can
be as low as 15%.
A Senate bill that passed its Appropriations Committee on Monday would
remove the 10% cap on annual rate increases for residential policies
sold after Jan. 1, 2022.
Efforts to reach Beruff for comment were unsuccessful.
Citizens spokesman Michael Peltier said by email: “Citizens presented a
set of recommendations for 2021 rates that reflected efforts to make
Citizens rates more competitive with private carriers and maintain its
position as Florida’s insurer of last resort. As it does every year, the
Office of Insurance Regulation reviewed those recommendations, made
changes, and issued its final order following that review. We respect