State Regulators Holding Hearing on Citizens Rates

9/20/2012
Tbo.com

MIAMI — Lawmakers joined customers and the state's consumer advocate Thursday in opposing rate increases proposed by hurricane-prone Florida's largest homeowner insurance company at a public hearing held by regulators in Miami.

State Sen. Mike Fasano, a longtime critic of state-backed Citizens Property Insurance Corp., said the company already has, in-effect, raised rates without approval. The New Port Richey Republican accused Citizens of inflating replacement values of homes, and thus their premiums. He also cited a re-inspection program that has revoked discounts many customers were getting for strengthening their homes against hurricanes.

Fasano also complained about lavish spending by Citizens officials on overseas trips and expensive hotel rooms and meals.

“Citizens has filed a premium rate increase that, given the myriad negative circumstances surrounding this insurance company, is not warranted and, frankly, is the epitome of arrogance,” Fasano said.

Citizens wants to raise rates for homeowners in coastal areas, which are at higher risk for hurricane damage, by a statewide average of 11.1 percent. The proposed increase for homeowners in other areas averages 12 percent. Increases, though, would differ from one area to another. The company also is seeking similar increases for mobile homes, condominium associations and other properties.

The hearing was conducted by Insurance Commissioner Kevin McCarty, who will decide whether to grant the rate increases.

Citizens president and CEO Barry Gilway said company officials were simply complying with state law by proposing increases designed to put it on a course to ensure that it has sufficient assets to cover potential hurricane losses without having to resort to special post-storm assessments to make up the difference. An outside consultant said that the currently proposed increases, though, will fall short of that goal.

“We're not the enemy,” Gilway said. “We're hired by and work for taxpayers and it's our obligation to do our very, very best to keep rates as affordable as possible.”

Florida Insurance Consumer Advocate Robin Smith Wescott said the premium increases should be denied because the company has overestimated its potential losses and is on a “glide path” toward rate adequacy thanks to recently passed legislation.

“Policies in some territories already have actuarially sound rates and many more will reach soundness within a year,” Wescott said.

She said separate rate increases for sinkhole coverage also would be excessive and failed to take into account savings resulting from a new law designed to curtail excessive claims.

State Reps. Frank Artiles, R-Miami, and Luis Garcia, D-Miami Beach, also spoke against the increases.

Artiles said he's been unable to get information from Citizens on how much the company is spending on attorney fees.

“Their costs are out of control,” Artiles said.

He also criticized the company's plan to give $350 million in low-interest loans to private insurers as an incentive to get to them to take thousands of Citizens' policies.

Gov. Rick Scott and many other politicians have been urging Citizens to spin off policies to reduce its exposure.

Some consumers told McCarty that they have dropped insurance coverage because they no longer could afford it rates that already are too high.

Citizens originally was formed as the insurer of last resort after large private companies pulled out of the state or balked at covering homes and other properties in high-risk areas. The company now has grown to 1.4 million policies and Gilway said it is adding customers at a rate of 300,000 per year.

McCarty said he will continue to accept written comments for another week. They can be submitted by email to RateHearings(at)floir.com.