The annual legislative session in Tallahassee is nearly upon us and lawmakers are once again devising schemes to “reform” Citizens Property Insurance. You know what that means: Hold on to your wallets!
The latest plan shares a common feature with so many other flawed efforts to remake Citizens: It attempts to lure private insurers into the state to take policies out of the public realm and thus reduce the risk to the public treasury if (when) a massive storm hits the state. That’s a worthwhile goal, but it’s been tried before and failed to succeed, for good reasons.
Cost, for one thing. In Miami-Dade County, the average standard homeowner policy through Citizens costs $3,300, equal to 5 percent of the average household budget. That’s a hefty chunk. Some people pay more for windstorm insurance annually than for a mortgage, and every plan to fix Citizens envisions even higher rates.
This one is no different: It sticks it to homeowners by allowing insurers to raise rates by 25 percent without a public hearing (instead of the existing 15 percent). If a private insurer offered coverage rates within 15 percent of Citizens’ prices — i.e., 15 percent higher — the homeowner would be obliged to accept or do without. And homes valued above $300,000 — nowhere near a mansion, by South Florida standards — would no longer be eligible for state-run insurance.
Ouch, ouch, and ouch. The sponsors of the proposed overhaul apparently are aware of the impact of the bill. They would remove the mandate that insurance in Florida be “affordable” and instead add new language requiring premiums that “reflect the risks covered.”
Sounds fair, of course, but when the industry’s skewed models are designed to reduce, if not eliminate, practically all the risk to themselves, the burden falls on homeowners and produces unaffordably high rates.
All of this comes on top of a series of actions in recent years to shore up Citizens’ finances by allowing it to slash coverage through reinspections, sparking annual premium increases of nearly $200 million.
Seniors living on a small, fixed income, already stretched to the limit, would be particularly vulnerable to significant rate increases, making it even harder for them to make ends meet and possibly forcing them out of their homes.
The timing isn’t great, either. Just as the housing industry is coming out of its depression, the move to increase Citizens’ rates would send a chill through the market, halting progress in real estate and giving potential homebuyers reason to think twice.
And, speaking of timing, the National Association of Insurance Commissioners reported on Friday that Floridians collectively pay $108.1 billion in insurance premiums, third highest behind New York and California.
Florida, with 5 million fewer people than Texas, pays $2 billion more in premiums. So instead of simply coming up with yet another plan to hike rates even higher, lawmakers should focus on ways to make insurance available but also affordable.
South Florida’s legislative delegation should insist that lawmakers also hold hearings on why Citizens blew millions of dollars on expensive contracts, corporate travel and unoccupied office space, as last week’s report by the Office of Insurance Regulation outlines.
If lawmakers are serious, they should demand that the state’s public insurer eliminate the waste before they sock it to homeowners again.