Florida regulators are currently considering a proposal that could result in significant rate increases for customers of Citizens Property Insurance Corp. The state insurer of last resort is looking to push policies into the private market, which has sparked debate and concern among homeowners and advocacy groups.
During a three-hour hearing held by the Florida Office of Insurance Regulation, it was revealed that the proposed rate increases would lead to an average 13.5 percent hike for the most common type of Citizens policy, homeowners‘ multi-peril coverage. This would mean an increase from an average of $3,560 to $4,041 for homeowners multi-peril policies, with other policy types also facing double-digit increases. For example, condominium-unit owners could see an average 14.2 percent increase for multi-peril coverage, with the changes set to take effect in 2025.
Citizens‘ Chief Actuary, Brian Donovan, highlighted that the proposed rate increases are necessary to address the actuarial unsoundness of the current rates and to align them with the private market. Citizens has been charging lower rates than private carriers, creating a disincentive for property owners to seek coverage elsewhere. However, state leaders and Citizens officials are keen on reducing the size of Citizens to mitigate financial risks in the event of hurricanes.
Citizens President and CEO, Tim Cerio, acknowledged the challenges faced by policyholders and emphasized the importance of balancing affordability with financial stability. He noted that while the market is recovering, Citizens‘ rates are not sustainable in the long run and need to be adjusted to reflect actuarial soundness.
Opposition to the proposed rate increases came from Fair Insurance Rates in Monroe (FIRM), a group advocating for fair insurance pricing in the Florida Keys. FIRM’s president, Mel Montagne, expressed strong opposition to any rate increase for Monroe County residents, who rely on Citizens for wind-only coverage.
State law imposes limits on annual rate increases for Citizens‘ customers, with different caps for primary residences and second homes. However, the discussion also highlighted the need for Citizens‘ rates to be competitive with private insurers, leading to the proposal for maximum increases in some areas to address the competitiveness issue.
The decision on whether to approve the rate increases or require adjustments from Citizens will be made by regulators in the coming weeks. Citizens officials argue that transitioning policies into the private market could help avoid assessments that would burden policyholders in the event of major hurricanes. The number of Citizens policies has been decreasing due to a depopulation program aimed at shifting policies to private insurers, with the goal of reducing the insurer’s overall exposure.
Overall, the debate over Citizens‘ rate increases underscores the complex challenges faced by homeowners, regulators, and insurance companies in balancing affordability, financial stability, and market competitiveness in Florida’s insurance market. As the state continues to grapple with the aftermath of natural disasters and the changing landscape of the insurance industry, finding a sustainable solution that benefits all stakeholders remains a pressing issue.