Customers of state-backed Citizens Property Insurance Corp. will see rates go up next year as the agency continues to aggressively shift policyholders into the private market.
The Citizens board on Wednesday approved an average 7 percent increase for its 1.26 million customers, with the mark around 7.5 percent for those with sinkhole coverage -- hikes that Citizens officials said are still not enough to cover projected costs for next year.
Board member John Rollins said the agency "needs to strike a balance" between the impact on customers and meeting actuarially sound rates.
The increase is expected to generate an additional $178 million for Citizens in the next year, while actuarial numbers estimate $505 million is needed in additional premium charges.
For single-family coverage, the average nonsinkhole rate will stand at $2,112 next year, up from $1,981 in the current year.
"We can't ignore the political consequences of what we do, but such interest must always yield to sound business judgment, fiduciary duty and the requirements of law," Chairman Carlos Lacasa said.
The rate hike comes with Citizens having a $6.4 billion surplus to brace for an emergency or two, and the board earlier this year approved two deals with private insurers to take out policies, with a cost to Citizens that could reach $115 million.
The rate proposal must still be approved by the Florida Office of Insurance Regulation.
The hike comes as state legislators, who imposed new rules on Citizens during the 2013 session, intend to review the decision-making practices of Citizens this fall.
The review stems from the Citizens board's May approval of St. Petersburg-based Heritage Property & Casualty Insurance Co., receiving up to $52 million to take out 60,000 policies.
The board had earlier approved Weston Insurance to take out up to 30,000 policies in exchange for up to $63 million.
Usually takeouts occur in November and December. But because the Heritage and Weston deals came closer to the June 1 start of hurricane season, the financial packages were included to provide coverage for the private companies that had not been able to build reserves through months of premiums collected on the policies.
During the meeting Wednesday at Miami Dade College, the board accepted parts of a new state law (SB 1770) that goes into effect July 1, including a requirement that all customers, when accepting Citizens policies or renewing coverage, sign an acknowledgement of risk.
The statement declares an understanding that Citizens policyholders face a surcharge of up to 45 percent to cover storm-related costs. Board members have considered the surcharge benchmark in the statement a "worst case" scenario.
The new law also creates an inspector general in Citizens, prohibits coverage for new structures closest to the beach, maintains existing rate caps, and establishes a clearinghouse with the intention of shifting more than 200,000 of the least risky policies into private hands.
Citizens President and CEO Barry Gilway said Wednesday that a realistic goal is to reduce the number of policies to 700,000 to 850,000. Anything below 700,000 would be more "difficult," he added.
For single-family homeowners, the average premium increase approved Wednesday is 6.2 percent. Condominium owners face an 8 percent average hike, and commercial property is in line for a 9.1 percent average increase.
Increases will vary depending upon the amount of coverage, and the location and appraised value of each property.
The biggest percentage increases are for those with sinkhole coverage, which doesn't receive the same 10 percent cap that is imposed on other Citizens policies.
The average increase for the sinkhole portion of coverage is 27.3 percent.
Areas around Tampa Bay have the highest sinkhole rates in the state, with coastal properties in Hernando County paying on average $1,723 to insure against sinkhole damage.
The average sinkhole policy in Pasco and Hernando counties will grow 20 percent, about $425 per policy, and 50 percent in Hillsborough County, an average of $185 per policy.
Pasco and Hernando counties had been in line for 25 percent hikes, which would have been about a $450 increase just for the sinkhole coverage.
Sean Shaw, a former state insurance consumer advocate and founder of Policyholders of Florida, criticized the increases.
"We only hear two things from Citizens Property Insurance -- either lack of self-control or rate hikes,'' Shaw said in a prepared statement. "Today it's rate hikes, and once again Tampa Bay is taking most of the punishment."
Outside the Tampa Bay region the average sinkhole policy was $212 this year.
Even with the higher rates, Lacasa said the state is "still playing catch up" on rates in the Tampa area.
Floridas Insurance Consumer Advocate Robin Westcott said that regardless of the rate, asking consumers to pay $400 on top of existing rates and in combination with other coverage is "pricey for consumers."
