Florida regulators order Citizens Insurance to reduce proposed rate increases

All eyes are on Citizens Property Insurance Corp., now the largest home insurer in Florida with about 1.3 million customers. The Office of Insurance Regulation ordered the state-backed company to reduce its proposed rate hikes within 30 days.

WINK News reported in June that Florida’s ‘insurer of last resort’ proposed double-digit increases. The company complained that its rates are often lower than private companies, which homeowners across the state quickly come to enjoy. State law limits annual rate increases with a cap at 12% (in 2023) for homes that are primary residences.

Citizens originally asked for approval of a 12 percent rate increase for homeowners with the most common type of policies. However, regulators told Citizens Friday to recalculate and reduce their proposed hikes. While this might benefit existing policyholders, it creates a gap between Citizens’ coverage and private market rates, which might lead to difficulties covering losses.

“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,” said Mark Friedlander, spokesperson for the Insurance Information Institute. 

Friedlander went on to explain that this situation could lead to a “hurricane tax” affecting all Floridians. 

“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 said, “so once again, by asking Citizens to reduce its rate request, it’s making that gap larger and creating a larger potential for a hurricane tax to be implemented if Florida sees significant hurricane loss activity this year.”

Additionally, Friedlander mentioned that Citizens Depopulation Program to shift policies to private insurers could be hindered by rate changes.

“It’s called depopulation, and that means some private insurers have agreed to step in and take on certain volumes of Citizens customers because the goal is to get Citizens to a much more manageable level,” Friedlander said. 

Ultimately, the goal of depopulation to move policies to private insurers faces challenges if Citizens can’t raise rates, and Friedlander believes a historic high of 1.7 million customers could be reached due to market turmoil. 

“Because they’ve grown so much, they have right now about 18% market share in Florida, which is double any private insurer,” Friedlander said, “and 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.”

Ultimately, Friedlander acknowledges that consumers are struggling. He said Floridians pay the highest average premium in the country, according to an analysis from the Insurance Information Institute. Specifically, Floridians are paying an average of $6,000 for home insurance this year, which is 42% higher than last year, and three and a half times higher than the average U.S. homeowner. 

“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.”

You can read the order, posted on the state Office of Insurance Regulation website, directed Citizens here.