Citizens Property Insurance cleared to raise rates

Article Courtesy of The Orlando Sentinel

By Aaron Deslatte
Published April 22, 2009

TALLAHASSEE - A plan to let the state-run Citizens Property Insurance Corp. raise rates up to 20 percent annually cleared its last House committee stop Monday, despite a rift between South Florida and inland lawmakers over whether coastal homeowners can shoulder the hikes.

The insurance package, carried by Rep. Bryan Nelson, R- Apopka, is designed to let the massive insurer float its rates back up to market levels after a three-year freeze meant to help coastal homeowners socked with soaring premiums.

The bill, HB 1495, would allow Citizens to start raising rates on homeowners by a statewide average of 10 percent next year — or as much as 20 percent on individual policies.

A similar Senate bill, SB 1950, cleared its last committee stop last week.

The bills would also allow private insurance companies to raise rates by 10 percent a year with little state review, while scaling back the amount of cheap backup insurance coverage the state sells these companies.

The Florida Legislature expanded its footprint in the private market in early 2007 to try to cut premiums for millions of homeowners. It increased the amount of cheap "reinsurance" it sells to private carriers through the state hurricane catastrophe fund by $12 billion in the hope that those companies would lower their premiums.

Though rates have been kept flat thanks to the state's refusal to allow big hikes by companies such as State Farm, Florida's "cat fund" wouldn't have enough cash to pay claims after an Andrew-sized hurricane.

And state-run Citizens — the largest property insurer in the state — would have to levy hefty assessments on the premiums Floridians pay for all types of insurance to pay its claims.

Last year, investor Warren Buffett was paid $250 million for a promise to provide the state some added financial protection, but even he wouldn't take a chance on Florida's unpredictable storm season this year.

Rep. Alan Hays, R-Umatilla, called this year's legislation a "kind and gentle" way to pull back from both the 2007 reforms and last year's decision to extend a rate freeze on the more than 1 million Citizens policyholders, most of whom live along the coasts and, particularly, in South Florida.

"The money simply is not coming in. Citizens cannot pay the claims," Hays told South Florida lawmakers on the House General Government and Health Care appropriations council, which passed the bill Monday.

"It would be terribly embarrassing," Hays added, "for the storms to hit and people come to the cat fund looking for their money, and we say 'Sorry, it's not here.'"

But South Florida Republicans and Democrats argued it was bad to force higher insurance rates on homeowners during the present economic recession.

"This may be a good bill at the wrong time," said Rep. Luis Garcia, D- Miami Beach.

Without extending the freeze or passing a legislative fix, Citizens' rates could climb 70 percent or more starting next year, the company has warned.

"What we're trying to do is reduce the premium increases that would come upon us if we do nothing," said Nelson, who is an insurance agent.

But Rep. Julio Robaina, a Miami Republican who voted against the bill, said lawmakers should consider extending the freeze instead of hitting people with rate hikes.

"Why in this kind of economy ... do we think that's good public policy?" Robaina asked. "For me, even the 10 percent is a little high. I don't think there's a single citizen sitting at home that's willing — that can pay."