Citizens Property seeks higher rates, coverage changes

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Posted January 29, 2021 | By Jim Saunders, News Service of Florida

TALLAHASSEE – Citizens Property Insurance Corp. could increase residential rates by an average of 7.2 percent this year, as the state-backed insurer contends with a flood of new policies and troubles in the private insurance market.

Meanwhile, the chairman of the Senate Banking and Insurance Committee on Monday filed a potentially far-reaching bill that seeks to reduce attorney fees and litigation in property-insurance disputes and limit the costs of claims for roof damage.

The Citizens Board of Governors on Tuesday will take up a plan that includes the average 7.2 percent hike, up from an initial 3.7 percent increase that it considered last month. The board shelved the 3.7 percent proposal and requested that staff members find ways to bump it up.

Proposed rate changes would vary widely, depending on factors such as types of policies and locations. For example, homeowners would see an average 6.1 percent increase, while policies for condominium units and mobile homes would see higher average increases, according to the plan posted Monday on the Citizens website.

A file photo shows hurricane damage to beach homes. Citizens Property Insurance Corp, the state-backed insurer, is seeking rate increases as it deals with a flood of new policies amid reported troubles in the private insurance market. [News Service of Florida]

The Citizens rate plan and the bill by Senate Banking and Insurance Chairman Jim Boyd, R-Bradenton, came after regulators last year approved dozens of double-digit rate increases for private insurers and as homeowners steadily turn to Citizens for coverage. Insurers blame issues such as litigation and roof-damage claims for financial troubles.

“We want to make certain that Floridians have access to property insurance that is both reliable and affordable,” Boyd, who runs an insurance agency, said in a prepared statement. “Right now we have a situation in our state where homeowners are paying more for their property insurance, and yet insurance companies are suffering massive losses.”

While Citizens was created as an insurer of last resort, it can be cheaper – and more available – for many homeowners than buying coverage from private insurers. Citizens had 427,000 policies in 2018 but saw its policy count grow to 532,000 in 2020. It is projected to increase to 630,000 policies, or more, this year.

That trend goes against a longstanding effort by state officials to shift policies to the private market and led the Citizens board last month to look for ways to increase rates more than the proposed 3.7 percent hike.

The new plan, which would take effect in August and would be subject to approval by the state Office of Insurance Regulation, includes a series of changes that combine to push up the proposal to 7.2 percent.

As an example, the plan would lead to Citizens setting aside additional premium dollars to avoid the possibility of what are known as “assessments.” Such assessments could be collected from insurance policyholders across the state – including non-Citizens customers – if major hurricanes hit Florida and inundate Citizens with costly claims.

Another part of the plan would eliminate a practice that allows some Citizens customers to receive decreases in their premiums. Those customers would see no changes in their premiums, rather than decreases.

Also on Tuesday, the Citizens board will consider a proposal that could lead to new customers paying actuarially sound rates, which in many cases would be higher than current customers pay. The board debated the idea in December but deadlocked on it.

At the time, opponents raised objections about the possibility of neighbors having potentially varying insurance rates for similar properties and said they think such a policy decision should be made by the Legislature.

Citizens’ rates have long been a controversial issue, with lawmakers and regulators facing pressure from consumers to hold down rates as residents in some areas complained they could not find affordable private coverage.

One factor that has held down Citizens’ rates, for example, was a decision by lawmakers to prevent individual policyholders from seeing rate increases of more than 10 percent a year.

But property insurance appears likely to become a high-profile issue during the upcoming legislative session, as private insurers and Citizens lobby for changes.

The insurance industry blames what it says is excessive litigation for part of the financial troubles, and Boyd’s bill would take a series of steps to try to reduce lawsuits. That includes trying to place new limits on the fees of attorneys who represent consumers in insurance disputes.

For instance, the bill (SB 76) would seek to limit “contingency fee multipliers,” a longtime goal of insurers. Florida allows plaintiffs to collect attorney fees when they prevail in cases against insurance companies, with the amounts typically set by a calculation of the number of hours spent on a case and a reasonable hourly rate.

But courts also can approve contingency risk multipliers that increase the fees. Under the bill, however, contingency risk multipliers could only be awarded “in a rare and exceptional circumstance with evidence that competent counsel could not be retained in a reasonable manner.”

Also, the bill takes aim at roof-damage claims, as insurers say they have faced a surge of questionable and potentially fraudulent claims. Boyd’s bill would take steps such as allowing insurers to use what is described as a “roof surface reimbursement schedule.”

Under the proposal, reimbursements could vary based on ages and types of roofs. For example, insurers would be required to provide full replacement coverage for roofs less than 10 years old. But they would be allowed to provide less coverage for other roofs.

Rep. Bob Rommel, R-Naples, has filed a bill (HB 305) that mirrors parts of the Boyd proposal on litigation and roofing claims, though it is not as broad. The bills are filed for consideration during the legislative session that starts March 2.

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