Citizens is seeking rate hike after water damage
Article Courtesy of The Herald-Tribune
Service of Florida
August 30, 2015
TALLAHASSEE - A "disturbing" rise in water-damage
claims in South Florida is driving Citizens Property Insurance Corp. to
seek an average 3.2 percent increase in rates for many homeowners, the
president of the state-backed insurer said Tuesday.
Without the surge in reported residential water damage over the past two
years, which is causing the agency to alter its approach to such claims,
Citizens would be asking for an average statewide rate decrease,
Citizens President and CEO Barry Gilway said during a rate hearing
before the Office of Insurance Regulation.
"You can't move away from the fundamental issue, when you take a look at
Miami-Dade, and you take a look at the rest of the state, there really
is no major differences in ages of home or any other characteristics,"
Gilway told Insurance Commissioner Kevin McCarty. "So it leads you to
the obvious conclusion, and the conclusion basically is there is more
fraud associated with these types of claims."
As it is, Citizens customers in Miami-Dade, Broward, Palm Beach and
Monroe counties, which comprise a large portion of Citizens' portfolio,
are more likely to see rates increases than homeowners in other parts of
the state under the rate proposals. And the reason is the water claims,
"If the Miami-Dade average (water damage) claim were the same as the
rest of the state, 99 percent of all Miami-Dade policyholders would be
getting an 8 to 9 percent decrease, not an 8 to 9 percent increase," he
McCarty gave no hint if his office would approve the proposed rates.
The new rates, if approved by the state regulators by the second week of
September, would go into effect Feb. 1.
The rates vary by county and depend on a property's location, the home's
style, and the type of policy.
The overall statewide average increase would be 3.2 percent, with
homeowners' multi-peril personal-line accounts going up an average of
1.3 percent and wind-only coastal accounts going up 9 percent.
Multi-peril coverage for mobile-home owners would go down 5.3 percent on
average. There is no proposed change to sinkhole rates.
The increase in claims, primarily in Miami-Dade County, is driven by
attorneys who specialize in water damage, which adds to attorney fees
and adjuster costs, Gilway said.
"The issue for us is, we don't even have a chance to work with a
policyholder to come up with a fair settlement," Gilway said after the
hearing. "You saw the numbers, 30 percent of all the water damage claims
come in with representation. We have not even talked to the insured. And
90 percent of all the claims coming in with representation come from
In 2012, about one in 12 homeowners in Miami-Dade County with a Citizens
policy made a water-damage claim, with the average cost just under
$9,000. In the past 12 months, Gilway said, one in eight Miami-Dade
policyholders with Citizens filed such a claim, with damage costs
running on average approaching $15,000.
"We're averaging 1,000 water-damage claims a month," said Gilway, who
described the increase as "disturbing."
John Rollins, Citizens chief risk officer, said a majority of the claims
come from reports of pipe failure. Citizens doesn't cover flood and
One change being made is that only Citizens adjusters, who are being
trained as to what to look for in water claims, will respond to water
claims in South Florida, Gilway said.
Gilway said he doesn't anticipate the need to get the Legislature to
enact new laws to address the increase in water-damage claims. But he
said he's working with Rep. Frank Artiles, a Republican from Miami who
has been a critic of the agency, on rules for making water-damage claims
with the state-backed agency.
The proposal would establish "mandatory" appraisal rules --- similar to
sinkhole claims --- in which both sides on a water-damage claim would
get to select an appraiser and if the two sides don't agree, the issue
would go before a mediator. The move would keep attorneys out of the
issue, Gilway said.
The rate proposals come as Citizens has dropped from 1.5 million
policies in 2012 to 589,456 policies as of July 31. Gilway said he
expects the number of policies to be just above 500,000 by the end of