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The Sunshine Economy

The Sunshine Economy: Citizens Property Insurance And The Cost To Protect Property

Citizens Property Insurance is asking state regulators to approve premium increases averaging 8.2 percent statewide for homeowner's insurance. It says it needed to hike rates more than 25 percent to keep up with the cost of risk.

The second largest home insurance company in Florida would have asked state regulators to raise premiums by 25 percent if it could have asked for a hike that big. Citizens Property Insurance, instead, wants regulators to okay an average increase of 8.2 percent.

"What we needed was 25 (percent)," says Citizens CEO Barry Gilway.

The property insurance company is backed by state taxpayers. Under state law, it can't hike annual insurance premiums by more than 10 percent. South Florida homeowners with Citizens insurance will see their annual premiums for their regular homeowner's coverage go up between seven percent to almost 10 percent, depending upon where they live. 

Still, Gilway says, "We are under-pricing the risk in the tri-county area today, and we are under-pricing it by 15, 16, 17 percent."  

Higher Price of Protection

How Citizen's Rate Increases Compare

AOB, Not Storms

After a quiet decade, Florida has been hit by four hurricanes in the past two storm seasons. Two have been major storms; Irma in 2016 and Michael in 2017. But, Gilway says, "The latest round of premium increases(is) not coming as a result of Irma or Michael, or natural disasters." 

Assignment of benefit allows a homeowner to sign over any insurance claim to someone else, usually a contractor fixing your problem or a lawyer. They then deal with the property insurance company and argue about the claim, oftentimes in court. The Florida Office of Insurance Regulation has found those assignment of benefit claims that wind up in court are 85 percent more expensive to settle than insurance claims that don’t involve an assignment of benefit.

A decade ago, these lawsuits numbered in the few hundred. Now there are thousands of these cases.

"I've been quoted as saying 'many of these claims are mined and manufactured,'" says Gilway.

Supporters of the assignment of benefit practice say it helps even the playing field between homeowners and deep-pocketed and legally skilled insurance companies, and it can help get a problem fixed faster.

On social media, a few WLRN listeners shared their concerns about efforts to limit the assignment of benefit.

Citizens says almost half of the insurance claim lawsuits filed against it come from customers with claims who hadn’t complained before proceeding with legal action.

Efforts to reform the assignment of benefit system in the past five Legislative sessions have failed, but Gilway thinks this legislative session will be different. "The numbers are so compelling and the rate increases by so many companies are so dramatic that we finally got the attention of key legislators."

Editor's note: Citizens Property Insurance is a sponsor of Florida Public Radio and the Florida Public Radio Emergency Network. WLRN is a member of that network.

Tom Hudson is WLRN's Senior Economics Editor and Special Correspondent.