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Insurance: In Sarasota, Some Rates Will Rise Up to 26%; in Manatee, 22%

10/3/2012
By: Zac Anderson
Herald-Tribune

Citizens Property Insurance customers will pay up to 26 percent more for hurricane coverage in Sarasota County and 22 percent more in Manatee County after Florida regulators approved new rates for the state-run insurer Tuesday.

Rates will increase 10.8 percent on average statewide for the typical Citizens homeowners' policy in 2013, with increases varying by policy type and region.

Most of the 90,000 Citizens customers in Sarasota and Manatee counties will see the wind insurance portion of their bill -- typically about half the total cost for homeowners' coverage locally -- increase by 10 percent. Those closer to the coast will pay more.

Homeowners in other parts of the state will pay up to 40 percent more for wind coverage from Citizens, the state's largest property insurance company with 1.4 million policies.

The higher rates are part of an aggressive campaign by state lawmakers and Gov. Rick Scott to shrink the state-run insurer, an effort that is drawing increasing criticism from those who say it will hurt struggling homeowners and impede Florida's economic recovery.

"The governor wants to turn the state around and get people back to work, but people won't be living here because they can't afford the home they're living in," said Sen. Mike Fasano, R-New Port Richey.

Citizens' board chairman Carlos Lacasa said the insurer tried to balance homeowners' concerns about rising costs with the need to maintain a strong company.

"I'm sensitive to the need to keep the rates as affordable as possible," Lacasa said, adding that the board also must "get Citizens to an adequate rate to have enough to pay claims when a storm comes."

Citizens currently has a $6.2 billion surplus, enough to cover all but the most catastrophic hurricanes without resorting to taxes on insurance policies statewide.

The rates approved Tuesday were reduced slightly from an 11.8 percent average increase requested by Citizens' board.

Insurance Commissioner Kevin McCarty said the approved rates represent a "reasonable approach."

"Our primary goal is to ensure Citizens policyholders are treated fairly and retain an opportunity to return back to a robust private insurance market as the Florida Legislature intended," McCarty said.

The final rate decision came after months of often rancorous debate about Citizens' future. The company rapidly absorbed policies discarded by insurers such as State Farm and Allstate, which accelerated their efforts to pullout of Florida in the wake of the record 2004-05 hurricane seasons.

State leaders say Citizens now represents a huge financial risk to average Floridians because the company can levy taxes on insurance policies statewide if it runs short of cash to pay claims after a major disaster.

They rarely mention that the same taxes are levied to pay claims when private insurers fail. Some of Florida's private property insurers, including relatively new and untested companies, may be more at risk of becoming insolvent than Citizens.

Regardless, Citizens has pushing hard to shed customers. The company is encouraging private insurers to take some of its policies; more than 200,000 Citizens customers will soon receive letters notifying them that a private company is offering to take over their coverage.

Citizens' board has taken other actions -- from reducing coverage to stripping discounts -- to make the company less attractive, but rate increases may have the greatest potential to drive customers away. The board even considered circumventing a state law that limits the company's average rate increases to 10 percent for everything other than sinkhole coverage.

Efforts to lift the rate cap ultimately were abandoned. The move outraged many homeowners and some public officials.

Fasano noted that Citizens already boosted rates for many homeowners this year through an inspection process that has revoked many policyholders' hurricane mitigation discounts. At the same time, the company is reducing coverage and no longer insures structures such as pool cages and car ports.

"They have already gotten their rate increases for the next three to five years from what Citizens has done through the backdoor," Fasano said.

Englewood retiree Bruce Pomeroy recently received a letter from Citizens indicating his pool cage will no longer be covered.

The 77-year-old pays $1,750 a year for property insurance for a home valued at $97,000. He understands the desire to shrink Citizens but worries about the rising cost of home insurance.

"I know some folks are paying a heck of a lot more money than I am but I'm a retiree and we live on a fixed budget," he said.