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Citizens Insurance: Double-digit rate hikes could have been even higher

FILE - The bridge leading from Fort Myers to Pine Island, Fla., is seen heavily damaged in the aftermath of Hurricane Ian on Pine Island, Fla., Oct. 1, 2022. On Friday, Dec. 9, Florida lawmakers released a massive property insurance bill that would create a $1 billion reinsurance fund, seek to reduce insurance lawsuits and force more people out of the state-created insurer of last resort even if it means property owners end up paying more. The bill was filed less than three days before lawmakers begin a special session on insurance, property tax relief for Hurricane Ian victims and reducing tolls for frequent commuters. (AP Photo/Gerald Herbert, File)
Gerald Herbert/AP
The bridge leading from Fort Myers to Pine Island, Fla., is seen heavily damaged in the aftermath of Hurricane Ian on Pine Island, Fla., Oct. 1, 2022.

The state-owned Citizens Property Insurance, the insurer of last resort in Florida, has proposed an average 14.2% statewide rate hike, but it could have been even higher, says a top property insurance analyst.

More than 1 million Citizens customers in Florida could have been hit with as much as a 60% increase, Mark Friedlander, of the Insurance Information Institute, told the South Florida Roundup on Friday.

Leaders of the state-backed Citizens Property Insurance Corp. approved a proposal last week that raises average rates by 14.2 percent this year, as they seek to push policies into the private insurance market.

The proposal still needs approval from the Office of Insurance Regulation before it could take effect and would lead to increases that would vary by types of policy.

For example, Citizens wants to raise rates on primary-residence multi-peril policies — the most-common type of homeowners’ coverage — by 12 percent, effective Nov. 1.

Friedlander, who is the institute's director of corporate communications, said Citizens’ increasing risk exposure is driving up rates.

Citizens has 1.2 million customers and is restricted by law on raising rates. As a result, the company is not allowed to charge the same rates as a private insurer.

“The average premium for a Citizens customer today is roughly 44% less than the private market averages,” said Friedlander.

Most of Citizen’s customers own property in South Florida. If a hurricane as disastrous as Hurricane Ian were to hit the region, it would wipe out Citizens’ reserves, said Friedlander.

“What happens then? Every Florida consumer is on the hook to help replenish those funds," said Friedlander. “That means we would see multiyear surcharges on our insurance renewal premium bills, whether you're a property owner, a renter or a driver, even on your auto insurance bills … to help replenish the funds of Citizens.”

He noted that Citizens, giving the risk factors of the Florida market, would be requesting a nearly 60% increase in premiums — if it were a private insurer.

At two rate hearings with the Office of Insurance Regulation for private insurers, two companies were seeking rate averages from 66% to more than 100%.

Before the Citizens Board of Governors approved the proposed 14.2% increase, President and CEO Tim Cerio said Citizens’ rates are “artificially low” when compared to the private market.

He said Citizens, which has seen massive growth during the past two years, needs to return to a smaller role in the market.

“For the economic well-being of the people of Florida, as well as for the good of Florida’s insurance market, Citizens must return to truly being that insurer of last resort for our state,” Cerio said. “We must charge actuarially sound rates, and we must not be competitive with the private market.”

Citizens has seen its policy count skyrocket from 569,868 on March 31, 2021, to 1,223,204, as private insurers have dropped customers and passed along major rate hikes because of financial troubles. The company expects to top 1.5 million policies by the end of this year.

Citizens’ proposed average 14.2 percent increase involves “personal lines” policies, which include such things as coverage for single-family homes, condominium units, renters and mobile homes.

State law caps annual rate increases for Citizens customers whose homes are their primary residences and who have multi-peril policies. The cap is 12 percent this year and 13 percent in 2024.

The News Service of Florida contributed to this report.

Natu Tweh is WLRN's Morning Edition Producer. He also reports on general news out of South Florida.
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