Florida Regulators Demand Reduction of Proposed Rate Increases for Citizens Insurance

All attention is currently directed towards Citizens Property Insurance Corp., which has emerged as Florida’s largest home insurer, serving approximately 1.3 million clients. In response to the state-backed company’s initially proposed rate hikes, the Office of Insurance Regulation has instructed them to revise and decrease these rate adjustments within a 30-day window.

In a report published by WINK News in June, Florida’s “insurer of last resort” had put forth rate increases in the double digits. Citizens complained that their rates often fall below those of private companies, which quickly becomes an attractive option for homeowners across the state. State law limits annual rate increments, capping them at 12% for primary residence homes in 2023.

Initially, Citizens sought approval for a 12% rate hike for homeowners holding the most common type of policies. However, regulators have directed Citizens to recalibrate and diminish their proposed increments. While this may prove beneficial for existing policyholders, it introduces a disparity between Citizens’ coverage and rates available in the private market, potentially leading to challenges in covering losses.

Mark Friedlander, spokesperson for the Insurance Information Institute, elucidated the ramifications, noting, “What it does is it creates a very large gap in terms of how much funds Citizens has to pay claims, because if they’re not charging enough for the risk, that risk exposure grows, and that means they are exposed to more potential losses, and not bringing in enough premium to cover those losses.”

Friedlander further warned of a potential “hurricane tax” that could impact all residents of Florida. “The potential is that every Floridian will pay what’s called a hurricane tax, which means we will all see multi-year surcharges on our insurance bills,” he explained. The decision to reduce Citizens’ rate request could amplify this gap, heightening the potential for implementing a hurricane tax if significant hurricane losses occur in the state this year.

Additionally, Friedlander indicated that Citizens’ Depopulation Program, designed to transfer policies to private insurers, might encounter obstacles due to these rate adjustments. “Because they’ve grown so much, they have right now about 18% market share in Florida, which is double any private insurer,” he stated. “That’s clearly a bad dynamic because the backstop insurance company is only supposed to be there when necessary. They’re not supposed to be a primary insurer.”

Friedlander acknowledged the challenges consumers face, emphasizing that Floridians are grappling with the highest average premiums in the nation. According to an analysis by the Insurance Information Institute, the average Floridian pays $6,000 for home insurance this year, a 42% increase from the previous year and three and a half times higher than the national average. “So there’s a lot of pain for consumers today,” Friedlander said. “It’s very expensive. They’re having a hard time finding coverage, and the rates continue to go up at exorbitant levels, so certainly that could be a key factor as to why the regulator says we need to have much more moderate rate increases, but the problem is those bigger picture issues.”