The board of Citizens Property Insurance Corp. approved a plan Wednesday that would raise residential insurance rates by an average of 8.2 percent starting in September —- with the hikes hitting almost all customers of the state-backed insurer.
Members of the Citizens Board of Governors expressed regret about the planned rate increases but blamed lawsuits that officials say are driving up costs in the broader property-insurance market. The issue focuses on litigation related to water-damage claims, particularly in Miami-Dade, Broward and Palm Beach counties.
“Litigation is completely and totally out of hand,” Barry Gilway, president and chief executive officer of Citizens, said during a board meeting in Maitland.
The planned rate increases still need approval from the state Office of Insurance Regulation. If approved, the hikes would begin in September and fully take effect over the following year as policies renew. Citizens has about 435,000 policies.
The average 8.2 percent hike would hit “personal lines” policyholders, including owners of single-family homes, owners of condominiums and renters — though increases would vary across the state depending on factors such as location. Commercial policies could see an average 9 percent increase.
Brian Donovan, chief actuary for Citizens, said 97 percent of homeowners would see rate increases under the plan.
The Citizens board voted 8-1 to approve the proposed rates, with board member Bette Brown of Monroe County the only dissenter. The vote came after discussion that centered on water-damage claims and the practice known as “assignment of benefits,” which is perhaps the most-controversial insurance issue in Florida.
Under assignment of benefits, homeowners sign over insurance claims to contractors, who then pursue payments from insurance companies. Citizens and other insurers contend the AOB process is filled with fraud and leads to expensive litigation. But contractors and trial attorneys argue that assignment of benefits helps ensure that damage claims are paid properly.
Ground zero for the debate has been Miami-Dade, Broward and Palm Beach counties, and Gilway said private insurers are reducing policies in those counties. Such reductions can shift more policies to Citizens, which has long been a major player in the Southeast Florida market.
“We’re becoming a tri-county company,” Gilway said.
Donovan said another concern is that many private insurers are receiving approval for double-digit rate increases, while Citizens rate hikes are capped by what is known as a “glide path, which blocks increases of more than 10 percent.
The result could be Citizens offering cheaper policies that will lead to the state-backed insurer writing more coverage — after years of attempts to shrink the Citizens policy count.
Citizens and other insurers have lobbied in recent years to change the assignment-of-benefits process to reduce litigation. But the state House and Senate have not reached agreement.
The issue is expected to draw heavy attention during the 2019 legislative session, with Insurance Commissioner David Altmaier issuing a statement Wednesday that said he will “continue to make AOB reform a top priority, support legislation that addresses AOB abuse and fight to hold consumers harmless.” The session will start March 5.