Citizens ponders but ultimately declines to raise rates significantly for new buyers

Citizens ponders but ultimately declines to raise rates significantly for new buyers

TAMPA, Fla. – April 26, 2012 – Citizens Property Insurance Corp. considered a premium increase for new homeowners at a meeting in Tampa today, but ended up making no decision in order to give analysts time to consider the legality, to look at broader options involved in rate calculations, and to consider the ramifications of doing so.

Citizens, the state-run insurer of last resort, has actuarially unsound rates, according to most analysts. The fund largely covers Florida homeowners in high-risk storm areas, but critics say it doesn’t charge enough to create reserves that would cover damage if a significant storm hit the state.

Critics of Citizens, which include Gov. Rick Scott, say Citizens’ low premiums cause two problems: They put all Florida policyholders at risk in the event of a major storm; and they undercut private insurance companies, which makes the Florida insurance market less competitive.

In 2009, the Florida Legislature passed a law limiting Citizens premium increases to a maximum of 10 percent per year, and it became effective in 2010. Since then, Citizens Property Insurance’s governing board has attempted to build reserves and charge more while still adhering to the letter of the law. The company has, for example, removed some homeowners from coverage and cancelled insurance for properties under construction.

Another idea for lowering risk and raising revenue came to light within the past few days – charge new homeowners more than neighbors with an existing Citizens policy. Proponents of the change said the 10 percent maximum increase established in law applies only to existing policyholders. Opponents disagreed.

At the Citizens board meeting today, Sen. Mike Fasano, R-New Port Richey, testified that raising rates on homebuyers would seriously undermine the market. “You can get all the rhetoric that you want, but the private companies are not coming back to some areas of this state – they’re just not,” he said. “Study or no study, if this is pushed or approved you will hurt our economy.”

The board settled on three major issues for further review. First, insurers break the state into “territories,” and owners in each territory pay a rate based on similar calculations. The board wants to look at how proposals affect not just the state, but also the individual territories.

Two, the board wants to consider a clear rate schedule that applies to new and existing coverage. Three, the board wants to get lawmakers and the Florida Office of Insurance Regulation involved in decisions, in part because lawmakers have statutory authority over Citizens and its rates.

Based on the areas of concern, Citizens board members decided the issue needed more study and may revisit it later.

Florida Realtors continues to monitor developments.

© 2012 Florida Realtors®

www.OnlyFloridaHomes.com


Diamond Award Winner Aaron Eyerman, Broker of Blue Water Realty inc of SW FL is considered a master listing agent, His marketing and international events have built a strong network. Eyerman has recently help a large group based out of Toronto, Canada secure a very unique property, Eyerman will be visiting Toronto Canada in the near future to host a local investment strategy seminar.

aaron@bluewaterrealtyofswfl.com