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Florida Legislature: Rate increases for Citizens' policyholders could gradually get higher

Daytona Beach News-Journal logo Daytona Beach News-Journal 3/24/2021 Jim Saunders
Property (family house) insurance protection concept. © Jirsak, Getty Images/iStockphoto Property (family house) insurance protection concept.

TALLAHASSEE — In Florida insurance circles, it’s known simply as the “glide path.”

For the past decade, the state-backed Citizens Property Insurance Corp. has been prevented from raising individual customers’ premiums more than 10 percent a year to avoid soaring increases.

But with a growing number of homeowners turning to Citizens for coverage — and many state leaders worried about accompanying financial risks — that glide path could get a little steeper.

The House Insurance & Banking Subcommittee on Tuesday approved a wide-ranging property insurance bill that would gradually boost the cap on annual premium increases for Citizens customers to 15 percent in 2026.

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The bill (HB 305) is aimed at helping shore up a troubled insurance market, while trying to find ways to shift homeowners from Citizens to private carriers. Citizens officials have argued for higher rates, as they say the state-backed insurer often charges lower premiums than private companies.

Also, backers of higher rates say that Citizens poses a huge financial risk if Florida gets clobbered by a  massive hurricane or multiple hurricanes. That is because policyholders across the state — including people who aren’t Citizens customers — could be required to cover deficits that Citizens might face in paying claims.

“We don’t want to be in the business,” said Rep. Mike Beltran, a Lithia Republican who serves on the Insurance & Banking Subcommittee. “We’re government — we’re not an insurer. We don’t want to be in that business. And if we can shore up the private market and have most or all people in the private market at affordable premiums, then that’s what we should do.”

But Citizens rates have long been a difficult political issue, as many homeowners in areas such as Southeast Florida have few — or no — other options for property insurance.

Rep. Omari Hardy, D-West Palm Beach, questioned parts of the House bill that could lead to higher rates for Citizens. Under the proposal, the 10 percent glide-path cap would increase by 1 percentage point a year until it is 15 percent in 2026.

“Given the point of Citizens, why would we want them to be able to increase rates at rates that would potentially collapse the difference between what’s available in the private market and what’s available for Citizens?” Hardy said. “How might that affect consumers?”

“I think the bigger question should be, I don’t think it’s a state or quasi-state agency’s job to supplement the market because we can’t attract legitimate private companies to come in here,” bill sponsor Bob Rommel, R-Naples said. “We have to fix the problem.”

Along with addressing Citizens’ rates, Rommel’s bill would make a series of changes in the broader property-insurance industry, including shortening the time for policyholders to file claims from three years to two years. Also, it would seek to prevent roofing contractors and public adjusters from soliciting business from policyholders, including preventing them from offering incentives to file claims.

But the House bill doesn’t go nearly as far as a Senate proposal (SB 76) that would allow insurers to limit the amounts they pay for many roof-damage claims. Insurers contend that questionable, or fraudulent, roof claims are helping drive up premiums.

Also, the Senate bill, which is scheduled to go before the Rules Committee on Thursday, would take steps to limit fees paid to attorneys who represent policyholders in lawsuits against insurers.

The bills come amid a backdrop of private insurers further restricting coverage they will write, which has had the effect of driving up the number of policies in Citizens. 

The state-backed insurer had 552,340 policies as of Feb. 28, up from 446,327 a year earlier, according to data on its website. Citizens President and CEO Barry Gilway has said he expects to have about 700,000 policies at the end of this year.

The Florida Office of Insurance Regulation is considering a request by Citizens to raise rates by an overall 7.3 percent this year, though hikes would vary widely based on factors such as types of policies and locations.

Citizens also is asking regulators for approval to charge new customers actuarially sound rates, which means those customers could pay more for coverage than policyholders whose premiums have been held down by the glide path.

This article originally appeared on The Daytona Beach News-Journal: Florida Legislature: Rate increases for Citizens' policyholders could gradually get higher

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