Citizens Property Insurance to vote on 6.8
percent rate hike
Article Courtesy of The Tampa Bay Times
June 22, 2016
Citizens Property Insurance has grown leaner and
fiscally much stronger thanks to a decade of hurricane-free seasons and
cheap reinsurance. But that does not mean its customers can escape rate
The board of the state-run insurer of last resort is poised to recommend
regulators approve an average statewide rate increase of 6.8 percent for
next year as non-weather related water loss claims continue to escalate.
Unlike recent years, rising claims for water losses are no longer just a
south Florida problem; it's spreading to cause a rate headache for many
other policyholders throughout the state.
In Tampa Bay, it's a mixed bag. Hardest-hit would be Citizens'
policyholders in Pasco and Hernando counties, where rates on all
personal lines accounts would go up 6.7 percent and 4 percent,
respectively. In both Hillsborough and Pinellas Counties, there would be
a more muted average increase of 2.1 percent, while rates would drop 2.1
percent in Citrus.
For multi-peril homeowners policies, the most common type of Citizens'
coverage, rates would rise 7.1 percent in Pasco, 4.3 percent in Hernando
and 3.1 percent in Hillsborough. Rates would drop 7 percent in Citrus
and stay almost flat in Pinellas, falling 0.3 percent.
A couple of the biggest concerns that have driven up Citizens' rates in
the past have dissipated:
With no major storms in 11 years and a customer
base that has shrunk to fewer than 500,000 policies, Citizens has
the financial ability to pay claims following a 1-in-100 year storm
and a second 1-in-16 year event without having to levy assessments.
(Under state law, Citizens can assess all property owners statewide
if they cannot pay claims after a major storm.)
Sinkhole claims have also fallen, so much so that
Citizens held off on any sinkhole rate increase in 2016 to gauge the
effect of a combined legislative fix and large sinkhole rate
increases in 2014
Enter what's known as "assignment of benefits."
That's when homeowners in need of repairs, often for water damage,
assign responsibility for the repair over to contractors to pursue
payments from insurance companies.
Property insurers statewide, including Citizens, have unsuccessfully
lobbied the state Legislature to restrict the practice, which they say
has been ripe for abuse and leads to litigation. Often the damage has
already been repaired before insurance companies are contacted, making
it hard to determine whether claims are valid.
Contractors and attorneys representing homeowners, however, have said
assignment off benefits lets them quickly make repairs to help
homeowners without waiting for insurance company approval.
A year ago, Citizens said, the abuse was mainly a south Florida problem,
which is why rates rose sharply in that part of the state but stayed
flat or fell elsewhere.
Citizens spokesman Michael Peltier noted recent reports of more TV ads
in Tampa Bay in which attorneys urged homeowners with hail damage to
contact them to go after their insurance company.
"We're seeing the percentage of claims that are coming to us with an AOB
(assignment of benefit) has tripled in areas outside of south Florida,"
Citizens spokesman Michael Peltier said.
"That's what makes us scared."
Claims submitted to Citizens with an assignment of benefit cost Citizens
on average 74 percent more than claims without an AOB. To pay
non-weather water claim losses, Citizens said it's been forced to tap
into its hurricane surplus. In 2015, the insured incurred $7 million
more in losses than it received in premiums.
Under the proposal being considered Wednesday, inland homeowners with
multi-peril policies would see an average increase of 6.3 percent, while
homeowners along the coast would see rates climb by an average of 8.6
The state Office of Insurance Regulation must approve any rate requests
submitted by Citizens.