Property insurance costs keep going up, and the Florida Legislature has a number of bills focused on the problem. But it’s too early to predict what might happen.
FORT LAUDERDALE, Fla. – Hey, customers of state-run Citizens Property Insurance Corporation: Some lawmakers see you as a problem.
Don’t misunderstand. It’s probably not your fault that private-market home insurance carriers in Florida are awash in red ink that’s been driving rates sky high. And it’s not your fault that you have few other choices. But the state-owned “insurer of last resort” has grown from 420,000 policies in 2019 to about 760,000 now. And that’s the problem.
During the current legislative session, which began last month, lawmakers have filed a number of bills that would make it harder for policyholders to remain with the company as long as competing offers don’t exceed Citizens’ premiums by more than 20%.
Lawmakers worry that if too many customers are in Citizens, chances will increase that all property insurance customers will be forced to pay special assessments if a catastrophe wipes out Citizens’ $7 billion reserve.
The goal of several bills filed in the state Senate and House this year “is to try to depopulate Citizens in appropriate and measured ways,” said Rep. Tommy Gregory, a Republican representing parts of Manatee and Sarasota counties, who is co-sponsoring one of the bills.
If enacted, the reforms could force current Citizens customers back into the more expensive private insurance market. Low-income homeowners, already squeezed by rising inflation, might not be able to afford to keep their homes, some lawmakers worry.
But that’s preferable to Citizens dissuading private competition by remaining the most attractive choice, reform proponents say.
Here’s how Citizens coverage could change under bills proposed during the current legislative session:
Potential surcharges would increase: The surcharge Citizens’ customers would face if the company exhausts its reserves after a catastrophic storm would become even larger under a bill proposed by Sen. Jeff Brandes, a Republican from Pinellas County. Currently, the maximum surcharge a policyholder could face would be 45% of their current premium. Brandes’ bill would increase that surcharge to 60% of their premium if Citizens grows from the current 760,000 policyholders to between 1 million and 1.5 million, and to 75% of the premium if Citizens’ policy count exceeds 1.5 million.
Eligibility to stay in Citizens would tighten: Several bills would make it harder for policyholders to remain in Citizens if competing offers are available. Brandes’ bill and another bill sponsored by Sen. Jim Boyd would prevent current Citizens policyholders from renewing their policies unless any and all competing private market offers exceed the cost of the Citizens policy by 20% or more. Currently, renewing customers can remain in Citizens as long as competing offers are higher than Citizens by any amount.
Boyd’s bill would also prevent Citizens policyholders from turning down a takeout offer from a private market insurer unless the offer exceeds the cost of the Citizens policy by 20% or more. Currently, Citizens customers can turn down takeout offers for any reason. The 20% thresholds proposed for renewals and takeout customers would match the barrier in place for new entrants.
Boyd’s and Brandes’ bills have both cleared the Senate Banking and Insurance Committee. On Wednesday, the House Subcommittee on Insurance and Banking advanced a version introduced by Gregory and Rep. Mike Giallombardo, R-Cape Coral, that would phase in the 20% threshold for renewing and takeout customers over four years, beginning with 5% in 2022.
Rep. Matt Willhite, Democrat from Wellington, reminded the committee that they’ll be telling residents unable to get coverage from any other company – including his mom – “that they’re going to have to pay 19% more” to stay in Citizens. Gregory responded, “The answer to Floridians is, ‘We’re not going to subsidize your insurance.’”
Only primary homes would qualify for a rate hike cap – Anyone who owns a second home, investment home, or other residential structure that’s not their primary residence would not be eligible for limitations on Citizens’ annual rate hikes, under Boyd’s bill. Currently, Citizens can’t raise base rates more than 11% a year for existing policyholders. That rate cap will gradually increase by 1% a year to 15% by 2026.
Unauthorized insurers would be allowed to take out Citizens policies. Surplus lines carriers – insurance companies not regulated by the state Office of Insurance Regulation and not bound by the same laws as “authorized” insurers – would be allowed to take out Citizens policies under Brandes’ bill and the House bill co-sponsored by Gregory and Giallombardo.
Steve Geller, a former state legislator currently serving on the Broward County Commission, appeared in his role as lobbyist for the Florida Association of Public Insurance Adjusters and cautioned that surplus lines policies aren’t subject to the protections that policyholders might expect. For example, he said, some might require customers to fly to a different state to sue the company or take a deposition of one of its officers.
Two other bills would authorize Florida-based surplus lines carriers to sell homeowners insurance in the state if they meet the same financial and solvency requirements as admitted carriers. However, those surplus lines carriers would remain exempt from state oversight over financial strength ratings, coverage requirements, premiums charged, and under what circumstances policies can be cancelled or nonrenewed.
Typically, surplus lines insurers are for specialty risks that normal insurers would not cover for one reason or another. Examples would include the Hope Diamond or a star quarterback’s arm. But Florida officials are so concerned about the absence of competitive insurance companies in the market that some are willing to let homeowners take the risk of signing with unregulated carriers.
© 2022 South Florida Sun-Sentinel. Distributed by Tribune Content Agency, LLC.
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