Citizens’ wind-only policyholders may see premiums increase

Treasure Coast Palm–March 19, 2009

By Jeff Ostrowski, Palm Beach Post

Port St. Lucie resident Massoud Kaye had to pick up the state-run Citizens Property Insurance last June when the company that had insured his home for several years, Liberty American Insurance Group, pulled out of the state.

The change came with an increase in his annual premium from $1,196 to $1,851.

“The governor promised before the election that he’s going to reduce property tax and property insurance,” Kaye said. “I don’t know for sure if he’s lowered property values, but I’m sure he hasn’t done anything for property insurance.”

Citizens officials and insurance regulators say they feel the pain of homeowners like Kaye, but after years of allowing insured values for some properties to languish, the state’s largest insurer is playing catch-up. Earlier this year, Citizens began the yearlong process of scrutinizing property values for 350,000 coastal properties that get their wind-only coverage from the state-run carrier.

Unlike private insurers, Citizens didn’t automatically raise property values each year as policies renewed – leaving many policyholders underinsured. After the severe hurricane seasons of 2004 and 2005, Citizens paid many claims that totaled more than the insured value of properties that were destroyed by storms.

“While it may feel a bit painful for someone to see their replacement value go up, Citizens is a subsidized entity,” said Jeff Grady, president of the Florida Association of Insurance Agents. “Everyone has a stake in seeing that those values are right.”

Thanks to a rate freeze that took effect in 2006 and lasts through this year, Citizens policyholders have enjoyed a respite from big jumps in their bills. But homeowners like Baker are seeing premiums soar anyway as the insured value of their property is reassessed.

“Citizens is just reassessing the premium based on the value of the property,” not trying to circumvent the rate caps, said Ed Domansky, spokesman for the Florida Office of Insurance Regulation.

“This is in no way a way around the rate freeze,” said Citizens spokesman John Kuczwanski. “It is an effort for us to collect premiums on the actual risk we insure.”

The changes affect Citizens’ wind-only policies, which are available in specific close-to-the-coast neighborhoods where private insurers won’t cover hurricane damage.

Citizens has about 42,000 wind-only resident customers in Palm Beach County, 2,018 in Indian River County and 1,311 in St. Lucie County. It has another 500 commercial wind-only customers in St. Lucie County, and 359 in Indian River County.

Citizens does not offer wind-only policies in Martin County.

Scripps Treasure Coast Newspapers staff writer Jim Turner contributed to this report.