135% Insurance Rate Hikes for South Florida?
A little off-topic, but with a fair portion of the industry concentrated in South Florida, I thought I would pass this along. If you listen carefully, you can hear the sound of air leaking from the bubble...
October 14, 2005
Palm Beach County homeowners who rely on state-backed Citizens Property Insurance Corp. for hurricane coverage could face major increases in the rates they pay... with premiums more than doubling in coastal communities.
A first-ever analysis of Citizens' rates ordered by the Office of Insurance Regulation showed that the wind portion of premiums in Palm Beach County would have to increase from 76.5 percent to 106.5 percent in order for the company to charge actuarially sound rates -- in other words, a rate that is sufficient to cover the risk in a certain area.
That means if you pay $1,500 toward the wind portion of your policy, and you live in an area where rates are recommended to rise by 106.5 percent, you could pay an additional $1,597.50 -- a total of $3,097.50 a year -- toward hurricane coverage.
The proposed increase is as high as 129.5 percent in Broward County and as high as 135.5 percent in Miami-Dade County. These latest suggested increases apply only to the hurricane portion of the premium, typically the largest part of a homeowner policy in Florida.
Separately, Citizens has another proposed increase of up to 32.5 percent in Palm Beach County for the fire and theft portions of homeowner policies.
This proposed increase applies only to policyholders whose hurricane coverage comes from Citizens, the insurer of last resort in Florida and the largest insurer in South Florida.
The company covers the wind portion of insurance policies for all homeowners and renters who live east of Interstate 95, and also provides insurance to homeowners who can't get a policy from a private company.
Citizens released the analysis Thursday. The company's Board of Governors will review the report at a meeting next month and will decide whether to submit a request for higher premiums based on the findings, said Citizens spokesman Justin Glover.
"We're going to let the board have that discussion," Glover said. "I don't know what the board will determine."
Citizens is required by state law to charge the highest premiums inFlorida. But Glover said regulators asked Citizens to do an actuarial analysis of its rates, rather than base them on private insurers' premiums, because "Citizens' risk is not necessarily the same as private companies" that won't cover coastal homes.
The board will receive additional information, such as the dollar amount that policyholders would see their premiums increase, "to let them look at the whole impact" should Citizens seek approval for higher rates from the Office of Insurance Regulation, Glover said.
Citizens also will be subject to a required public hearing on its rate increase.
These latest proposed increases come on top of a 6.8-percent one-time assessment that all insurance policyholders are paying to bail out a $516 million deficit in Citizens' high-risk, or wind-only, account to make up for losses from last year's four hurricanes that hit Florida.
Every Floridian with a home insurance policy pays that assessment, regardless of whether Citizens insures them.
Someone with a $2,000 annual premium will pay an additional $136 to compensate Citizens for losses it incurred after the 2004 hurricane season.
The assessments and the possibility of higher rates comes at a tough time for Citizens, under fire for alleged bribery and possible conflicts of interest by former executives.
The company's former chief operating officer resigned amid allegations he took a motorcycle and money in exchange for claims adjusting contracts, while two other executives resigned after it was discovered they planned to create an insurance company to take policies out of Citizens.
While Citizens has a responsibility to ensure they can pay claims from future catastrophes, "We are sensitive to the concerns of our policyholders who are struggling to afford the rising cost of insurance," Citizens executive director Bob Ricker said in a written statement.
"We look forward to working with the Legislature and state policymakers as Citizens determines our appropriate rates."
Copyright (c) 2005, South Florida Sun-Sentinel