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New policy talks continue between Citizens, insurance regulators

12/17/2012
By: Gray Rohrer
The Florida Current

The deadline for Citizens Property Insurance Corp. to respond to state regulators over a new homeowners policy came and went Monday, but little was resolved in the dispute over the rates for the new policy.

Known as HO-8, the new policy option is a stripped-down version of the standard homeowners’ policy, and doesn’t cover water leaks or falling objects. Typical HO-8 policies in the private market pay only actual cash value for the structure of the home, but the new Citizens HO-8 policy would have the option of replacement cost value for claims.

Lawmakers inserted a provision into HB 1101 this year declaring Citizens must offer the HO-8 policy by Jan. 1.

Citizens board members, though, don’t want to offer the policy at all, and especially not for the statewide average 28 percent less than the standard homeowner policy, which regulators prefer. Citizens originally filed the HO-8 policy at 7 percent less than the standard policy. The filing was based on what Citizens considers actuarially sound rates -- what the rates would be in the private market -- but regulators think the HO-8 policy should be based on the same 10 percent annual rate increase cap that applies to standard policies. Regulators also point out that should they approve Citizens initial filing, the HO-8 policy with less coverage would cost more than the standard multi-peril policy in some areas of the state.

Citizens, a state-run company with 1.47 million policies, has been trying to reduce its risk and the potential assessments to all policyholders, often in ways that have upset consumers: reducing or eliminating coverage without a drop in premium, pedantic inspections of wind mitigation credits, and pushing for optional sinkhole coverage. Its board members are worried consumers will gravitate toward a cheaper policy with inadequate coverage.

The Citizens board directed its staff to continue negotiations with the Office of Insurance Regulation, but told them to withdraw the filing if regulators did not agree to a “reasonable” rate.

But Rep. Mike Fasano, R-New Port Richey, said the Legislature simply wants Citizens to offer a choice to consumers who otherwise can’t afford the standard policy. He thinks OIR should threaten legal action to enforce the statute if Citizens refuses to offer the policy.

“The statute is clear that they’re going to offer the new policy and give homeowners a choice,” Fasano said. “OIR should be the one that enforces it and if they don’t, they should take them to court.”

OIR officials did not answer emailed questions or respond to calls Monday, but a spokeswoman stated talks with Citizens are ongoing.

Fasano said Citizens is putting the goal of reducing its exposure before everything else, at the direction of Gov. Rick Scott, who has advocated for shrinking Citizens.

“The problem with Citizens is they’re getting their marching orders from the governor and his administration to keep people out of Citizens at all costs,” Fasano said.

Other consumer advocates, however, are skeptical of the HO-8 policy. Jay Neal, executive director for the Florida Association for Insurance Reform wrote a letter to Insurance Commissioner Kevin McCarty asking him to approve Citizens’ original rate filing. Insurance Consumer Advocate Robin Westcott is concerned homeowners will not be aware of the stripped down coverage in the new policy until it is too late.

“Unfortunately, my experience has been people don’t understand the difference until it’s time to actually pay the claim,” Westcott said.

Reporter Gray Rohrer can be reached at grohrer@thefloridacurrent.com.