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Sha'Ron James

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Citizens: Water Loss Claims, Litigation Behind 6.4% Homeowners Hike


Date: September 19, 2016
Source: Best's news Service


The Florida Office of Insurance Regulation has approved a Citizens Property Insurance Corp. average statewide homeowners’ premium rate increase of 6.4% for 2017 that Citizens said addresses “a disturbing increase in non-weather water loss claims and litigation.”

The final rate is a reduction from the 6.9% rate increase that was the subject of an Aug. 18 public hearing during which Citizens identified an increase in water loss trends as a driving factor behind increased rates (Best’s News Service, Aug. 18, 2016). The statewide average wind-only rate for homeowners will increase by 8.2% in 2017.

Mobile home owners will see a 5.7% average increase in multiperil rates, while wind-only mobile home coverage – which remains well below market rates – will increase by 10.3%, according to Citizens. For personal property-dwelling fire policies, Citizens seeks increases of 5.3% in the personal lines account and 9.3% for wind-only properties in the coastal account.

Sinkhole coverage rates will remain flat. “The 2017 rates reflect the growing challenge of rising water loss claims and the disturbing increased costs associated with assignment of benefits,” Barry Gilway, Citizens’ president, chief executive officer and executive director, said in a statement. “Unless the Legislature takes action, our policyholders can expect these increases for years to come.”

The Citizens board had initially approved a 6.8% rate hike – later increased to 6.9% - and warned at the time that similar increases could occur in the future if skyrocketing increases in non-weather related water-loss claims were not addressed. In making its final determination, the OIR used slightly lower water loss trends than Citizens had proposed due to a drop in risk because of Citizens’ depopulation, the final ruling said.

Water damage claims jumped because homeowners signed assignment of benefits agreements enabling a home repair vendor to assume the policy, inflate claim costs and then file a lawsuit when insurers dispute the bill, Mark Wilson, the Florida Chamber of Commerce’s president and chief executive officer and the leader of the Consumer Protection Coalition, said during the August hearing. The effective date for both new and renewal rates within the personal lines account and the coastal account is Feb. 1, 2017.

Preliminary figures show that more than 100,000 Citizens policyholders will see rate reductions under the 2017 proposal, as Citizens continues to adjust rates based upon recognized actuarial standards that require rates be based largely on local risk factors.

The hike comes despite depopulation efforts that have seen the numbers of Citizens’ policyholders fall from a peak of nearly 1.5 million in 2012 to 492,775 as of Sept. 9.

Also, Citizens’ has been able to buy reinsurance to pay claims in the event of a 1-in-100-year storm plus a second 1-in-16-year event without having to charge insurers assessments. The OIR also requested a review by the Florida Commission on Hurricane Loss Projection Methodology on how wind rating models and stricter building standards impact rates in Monroe County.

This review is in addition to a separate initiative to evaluate the county’s building code standards and their effect on rates.

The OIR will seek an additional rate filing by Citizens for its policyholders in Monroe County if the results of either effort support such a filing. The top five writers of homeowners’ multiperil insurance in Florida during 2015 were University Insurance Holdings Group, with an 8.54% market share; Tower Hill Group, with 7.62%; State Farm Group, with 7.00%; Citizens Property Insurance Corp., with 5.74%; and Federated National Insurance Co., with 4.65%, according to BestLink.