State insurer promoting rate increases
Jun 6, 2012
The following article was published in the South Florida Sun Sentinel on June 6, 2012:
State insurer promoting rate increases
By Paul Owers
The head of Citizens Property Insurance Corp. is touring Florida, telling customers to brace for higher rates.
Starting Jan. 1, new Citizens customers may no longer be protected by a 10 percent cap on rate increases.
Under a proposal expected to go before the Citizens board this summer, some South Florida homeowners would pay more than 50 percent more than neighbors with similar coverage. Some condominium owners would pay double.
Tom Grady, acting president of the state’s insurer of last resort, isn’t trying to sugar-coat reality — even for homeowners in South Florida, where there are few alternatives for windstorm insurance.
Everyone favors lower rates, but “the price of insurance is the price of insurance,” Grady told the Sun Sentinel editorial board Tuesday. “The question is who pays it and when?”
Citizens is by far the largest insurer in Florida, with nearly 1.5 million policies, including about 300,000 in Broward and Palm Beach counties.
It has been decreasing coverage and raising rates as a way to push customers toward private insurance coverage.
On Monday, 25 state legislators signed a letter backing the unfettered premiums for new Citizens customers. All but one was from Central and North Florida.
State Rep. Bill Hager, R-Boca Raton, also signed the letter, explaining to the editorial board on Tuesday that many Florida homeowners don’t realize they’re facing costly assessments.
Hager said Grady needs to keep promoting the downsizing of Citizens, even though it’s not politically popular.
“If we don’t mud wrestle Citizens to the ground … there will be hell to pay,” Hager said.
All policyholders in the state could be charged up to 6 percent of their annual premiums, if Citizens were to run out of money to cover property damage after a storm. Citizens’ policyholders could be assessed up to 45 percent of their premiums.
Floridians are still paying for claims from the busy 2004 and 2005 hurricane seasons, Grady said.
Citizens now has $6 billion in available cash and can pay as much as $19 billion in claims, but a significant hurricane could devastate the insurer financially, he said.
Citizens held a meeting last week to seek ideas for cutting risk and says it remains open to new proposals.
If the insurer were to lift the 10 percent cap for new customers, the rate increases likely will be phased in to avoid “sticker shock,” Grady said.
Consumer advocates, including Policyholders of Florida, have blasted the proposal, saying insurance would be unaffordable for homeowners who have no other choice besides Citizens.
Some private carriers offer coverage but charge more than Citizens, while others have pulled out of Florida entirely, saying the rates the state allows them to charge don’t justify the risk.
“Anything less than a measured approach [to reducing Citizens’ exposure] will destroy our housing recovery,” Sean Shaw, founder of Policyholders of Florida, said in a statement.
View the original article here: http://www.sun-sentinel.com/business/fl-citizens-editorial-board-20120606,0,4921074.story