By Zac Anderson, Sarasota Herald-Tribune
Robin Westcott, Director of Property and Casualty Financial Oversight, Florida Office of Insurance Regulation, right, and Belinda Miller, Deputy Insurance Commissioner, speak during the Cabinet meeting Tuesday at the Capitol in Tallahassee. COLIN HACKLEY
Florida's largest property insurance company plans to increase rates for the fifth straight year, a move that would cost customers $178 million.
With a proposed 6.9 percent statewide average increase for all policy types in 2014, state-run Citizens Property Insurance is continuing an aggressive campaign to boost rates and drive more customers into the private market.
A standard “multi-peril” homeowner's policy would, on average, cost an extra $150 annually in Sarasota and Manatee counties, an increase of 7.7 percent. The company has 80,000 policies of all types in Sarasota and Manatee, and 1.26 million statewide.
If next year's increase is approved, Citizens will have boosted rates for the standard homeowner's policy by an average of 43 percent statewide since 2010. The average policy would cost $2,380 in 2014.
Citizens' board is scheduled to vote on the rate proposal today. A subcommittee unanimously approved the increase on Tuesday.
Citizens leaders say higher rates are needed to cover losses after a major hurricane and ensure that the government insurer — designed to be an “insurer of last resort” — does not compete with the private market.
But those arguments are hard to justify anymore, some consumer advocates say.
Citizens ended 2012 with $6.3 billion in reserves and has enough resources to pay claims after all but the most catastrophic hurricane.
The company's board even voted recently to give $52 million of its surplus to a private start-up insurer.
Many Citizens policies are now more expensive than policies on the private market, said Robin Westcott, the state's insurance consumer advocate.
Westcott said “all this hoopla, the ‘Oh my God, the sky's falling and we need adequate rates in Citizens' ” mentality, no longer stands up to scrutiny.
The Legislature froze rates at Citizens for three years to help put the brakes on soaring insurance costs following the destructive 2004 and 2005 hurricane seasons.
Florida's private insurers have long complained that the rate freeze made the state-run company too attractive.
But starting in 2009, lawmakers allowed Citizens rates to increase up to 10 percent annually. State leaders this year considered increasing the rate cap, but ultimately decided on less-aggressive reforms to push more Citizens policies toward private insurers.
Under the new law, insurance agents will have to shop policies around more extensively in the private market; Citizens' coverage limit will drop from $1 million to $700,000 over three years.
But rates are still an issue, said Citizens spokesman Michael Peltier.
“We're still trying to catch up from rates that have been significantly inadequate,” Peltier said.
Westcott said four years of rate increases that starting in 2010 more than made up for any lost ground.
“We're there — we're at the top of where the price should be,” Westcott said.
Premiums for a multi-peril homeowner's policy increased by 10.8 percent statewide this year, on average; 6.2 percent in 2012; 10.3 percent in 2011; and 5.4 percent in 2010.
Citizens is proposing another 4.8 percent average increase in 2014 for multi-peril coverage, which accounts for risks including fires and leaky pipes along with hurricane damage.
Other policy types, like “wind-only” hurricane coverage, would increase by an even greater amount.
Most of the policies still considered underpriced by Citizens are connected to hard-to-insure properties that the private market has all but abandoned: typically older homes near the coast.
Westcott said Citizens could increase rates on these homeowners for years and still not reach a price that would be attractive to the private market.
“These aren't rich people,” and the problem “can't be cured with repetitive rate increases because those people won't be able to afford it,” Westcott said.
Westcott's solution: Offer incentives for Citizens customers in the riskiest areas to install storm shutters and other hurricane protections.
Spending and scrutiny
Citizens recently came under fire for giving $52 million from its reserves to St. Petersburg-based start-up Heritage Insurance as an incentive to take policies from the state-run company.
Westcott believes the money would have been better spent hardening homes against hurricanes.
Peltier said that among Citizens officials, “there's a feeling that the reduction in risk more than offsets” any concerns about giving Citizens' funds to a private company. Shedding the policies reduces Citizens' potential hurricane losses.
“Citizens' establishing a mitigation program with surplus funds makes a whole lot more sense than loaning out money to insurance companies,” Westcott said.
Venice resident Jerry Mitchell said he was astounded when Citizens sent him a letter stating that his premium is more than doubling this year, going up from $1,081 to $2,271 for a two-bedroom house worth $80,000.
Citizens revoked a number of discounts Mitchell had been receiving, after an inspector ruled that his home was not as hurricane- resistant as previously believed.
A retired air-conditioning repairman, Mitchell lives mostly off his Social Security.
Every additional rate increase means he will “have to stop doing some of the stuff I do, maybe drop my insurance altogether or sell the house,” Mitchell said.
“It doesn't seem right at all,” he said.