The chairwoman of the Senate Banking and Insurance Committee said Wednesday that customers of Citizens Property Insurance should receive rate reductions as the state-backed insurer takes steps to curb claims for water-damage repairs.
Miami Republican Sen. Anitere Flores said during a hearing on proposed Citizens rate increases that South Florida policyholders are frustrated and have “lost trust” in the insurer.
She said the company manages to find a new “parade of horribles” to blame for rate increases – currently the issue is a practice known as assignment of benefits – before any relief can be provided to homeowners.
“People just feel that they can’t get ahead,” said Flores, who opposes Citizens’ proposed rate increases now before the state Office of Insurance Regulation.
Citizens has proposed hiking premiums on homeowners an average of 6.7 percent statewide, pointing to fraud and abuse in water-damage claims primarily in Southeast Florida. The issue with water-damage claims is linked to assignment of benefits.
The Office of Insurance Regulation held a hearing Wednesday at Florida International University in North Miami. Insurance Commissioner David Altmaier said decisions on the proposed rate changes will be made in the “first part” of September, with any changes taking effect Feb. 1.
Rate changes would vary depending on factors such as where Citizens customers live and their coverage amounts.
State Insurance Consumer Advocate Sha’Ron James said Citizens – created as Florida’s insurer of last resort – is becoming “less and less affordable,” particularly in Miami-Dade County, which includes a major portion of the company’s customers.
Citizens and other insurers have been arguing for several years that changes are needed to assignment of benefits. That practice involves homeowners signing over benefits to contractors, who ultimately pursue payments from insurance companies.
Insurers and business lobbying groups including the Florida Chamber of Commerce contend the practice has become riddled with fraud and litigation, especially involving water-damage claims. Legislation aimed at addressing the issue failed to pass during this year’s session.
“The average cost of water claims has increased in South Florida from $10,000 to $20,000. That’s 100 percent,” said Barry Gilway, Citizens president and CEO.
In part to combat the growth of such cases, Citizens has moved to cap water-damage repairs unrelated to weather at $10,000 for policyholders who do not take part in a “managed repair” program. The repairs, for example, can involve such things as burst pipes.
Flores said the program adds anxiety to homeowners in a “moment of duress” as they are forced to quickly decide if they will go with unknown contractors offered by Citizens or their own contractors, which would require out-of-pocket payments once the repairs top $10,000.
“The challenge is that this comes with no benefit to the consumer as far as seeing some sort of rate relief, rate reduction, rate freeze,” Flores said. “We hear from Citizens that some of that might happen in the future, but history tells us that the minute we solve that problem, another issue is going to come up.”
Flores said her committee will look at reducing the authority of the Office of Insurance Regulation to approve similar programs in the future unless accompanied with rate relief.
Under Citizens’ new rate proposals, the average residential multi-peril policy would increase from $2,512 to $2,681.
Yet in Miami-Dade County, where there are 51,500 policies, the average rate would jump 10.5 percent, from $3,421 to $3,780. The 23,683 policies in Broward County would go up 10.4 percent, from $2,842 to $3,136, and the 10,307 policies in Palm Beach County would face an average bump of 9.3 percent, from $2,631 to $2,877.
In Pinellas County, where there are 26,086 multi-peril policies, the rate on average would drop 5.7 percent, from $1,755 to $1,656. In Hillsborough County, the rate would up 0.8 percent, from $1,550 to $1,561.
Citizens is also looking to have most wind-only homeowners’ policies go up on average 1.2 percent — from $2,769 to $2,802.
Such wind-only policies would go down 0.8 percent in Broward and drop 5.3 percent in Miami-Dade counties. Yet, Palm Beach homeowners with wind-only policies would see rates go up 2.6 percent, and in Monroe County, which includes the Florida Keys, the wind-only rate would grow 3.9 percent.
Citizens officials credited past annual increases in wind-only rates along with lower costs of reinsurance — backup insurance for insurers — for those policies being more actuarially sound when compared to costs on the private market.
The Office of Insurance Regulation will continue to accept public comments on the rate proposals until 5 p.m. Aug. 31. A year ago, after Citizens proposed a 6.8 percent statewide rate increase for multi-peril accounts, insurance regulators approved a 6.4 percent average increase.
Republished with permission of the News Service of Florida.