More than a million Florida customers may soon face another raise in their insurance rates.
The Citizens Insurance Board of Governors gave a proposed rate raise the first necessary sanction to go into effect.
The proposed rate increase will raise personal property insurance premiums by an average of 14%.
This would be the company’s largest average rate hike and only the second double-digit rate hike in its history.
According to insurance experts, this is unlikely to be the company’s final rate increase, as it seeks to reduce its client base.
“Citizens’ goal is for less customers,” said Mark Friedlander, the Insurance Information Institute’s Florida spokesperson. “They’ve been going through the people. It’s been quite successful. Since October of last year, they have transferred over 400,000 policies to private carriers.
According to state law, the planned 14% rate hike is the maximum allowable rate increase.
“These are very positive indications that we’re creating an environment where there’s a potentially more stable marketplace inside the state of Florida and there’s more competition,” said Charlie Lydecker, a member of the Board of Governors.
Citizens Insurance, administered by the state, is renowned as the “insurer of last resort,” although it is also Florida’s largest insurer. The company administers 1.2 million insurance.
It was originally intended for homeowners who were unable to obtain insurance on the private market. However, as commercial insurers canceled policies and hiked premiums over the years, Citizens Insurance became a more inexpensive option.
“They cannot charge what we refer to as actuarially sound rates, meaning if they were a private insurer, they would have been charging much higher rates over the past several years just based on market conditions, risk exposure,” according to Friedlander.
According to Friedlander, private-market rate increases are actually smaller this year.
“The bottom line is, the private insurance market has gotten much healthier,” Friedlander told reporters. “That’s why they’re able to adjust their rates now to very moderate levels.”
He claims that Citizens Insurance is increasing rates in order to achieve more stable rates.
“So, if their rates are higher on average than the private market this year, that will be another incentive for consumers to choose private insurers over citizens,” according to Friedlander.
He predicts that Citizens Insurance will add thousands of new clients per week throughout hurricane season. According to Friedlander, the corporation has indicated that depopulation will be put on hold during hurricane season.
“Our real dream is de-population and reduced rates,” Lydecker stated.
Citizens Insurance claims that the anticipated rate increase is less than half of what the company would need to raise rates by if there was no cap.
“38% is the real data,” Friedlander stated. “That’s what they would be charging if they were a private market.”
According to the Citizens Insurance Board of Governors, the company’s total number of policyholders may fall below one million.
The Board of Governors voted to approve the proposed fee increase.
The Florida Office of Insurance Regulation will need to approve the hike.
The office could send the rates back to the board, but the plan would have to be amended and re-filed.