|Date:||June 20, 2016|
State-run Citizens Property Insurance Corp. is seeking rate increases for South Florida homeowners that fall just short of the 10 percent maximum allowed under state law.
And as President and CEO Barry Gilway has been warning for months, the company is blaming the requested hikes on increased claims and lawsuits stemming from non-weather-related water losses.
If state regulators approve, nearly 79,000 owners of single-family homes in the tri-county area would see rate increases of around 9 percent for multi-peril insurance — the most common type that includes protection from hurricanes and risks such as fire, burst pipes and liability, according to documents posted on the insurer's website on Monday.
In Broward County, 20,250 multi-peril customers would see rates increase by 8.9 percent, while the average insurance bill would increase from $2,661 to $2,897 annually.
Rates for the same type of policy in Palm Beach County would increase 9 percent, hiking the average bill from $2,448 to $2,668. Miami-Dade customers would see rates go up 9.1 percent and the average bill would rise from $3,200 to $3,493.
Last year, Citizens requested average increases of 2.9 percent in Broward, 0.7 percent in Palm Beach and 7.4 percent in Miami-Dade for multi-peril coverage of single-family homes.
Increases in water claims and lawsuits are driving the need for higher rates, Citizens said. In South Florida, the average annual cost of water damage per policy increased from $1,443 to $1,955, the company said.
The high costs are driven, Citizens says, by water damage repair companies that require policyholders to sign over their right to collect benefits from insurance companies after events such as plumbing emergencies or appliance malfunctions. Attorneys file suit if Citizens underpays or fails to pay repair companies' invoices, leading to sharp increases in losses in recent years.
But Citizens and other insurers have been unsuccessful in persuading state lawmakers to restrict assignment of benefits, and Gilway has warned of indefinite 10 percent annual increases if reforms are not enacted.
Rates for wind-only policies, which are purchased by coastal residents solely for protection against hurricane damage, would increase in 2017 by 9.4 percent in Broward, 9.5 percent in Palm Beach and 6.5 percent in Miami-Dade counties.
Condo owners would pay an average 8.4 percent more in Broward and Palm Beach counties and 7.4 percent more in Miami-Dade. Average premiums for condo owners tend to be significantly lower than for single-family homeowners. In Broward, for example, the average premium will increase from $798 to $865.
The proposed rate increases will face votes of Citizens' Actuarial & Underwriting Committee on Tuesday and the company's Board of Governors on Wednesday. If approved, the state Office of Insurance Regulation will hold a rate hearing, likely in August, and the increases would take effect for new and renewing policies on Feb. 1.
Statewide average rate increases for personal lines policies, which include homeowners, renters, condo units and mobile homes, would be 6.8 percent, compared with 3.2 percent approved last year for 2016. Statewide average rate increases for commercial policies would be 9 percent.
This year, the company "had to pull some money from [its] surplus to pay for water related losses," Citizens spokesman Michael Peltier said. "Our 2017 rates, we hope, will be sufficient to pay claims without tapping into surplus."
Paul Handerhan, Florida Association for Insurance Reform senior vice president of public policy, said that while the Citizens rate recommendation appears justified, the increases could continue unless the assignment of benefits issue is handled.
"We're a little bit frustrated that ratepayers are flipping the bill for this and it doesn't seem like there is any end in sight, at least in the near term," Handerhan said. "It affects the affordability of home ownership, it affects the attractiveness for new businesses to come to Florida."
Information from the News Service of Florida was used in this report.