Citizens raises rates almost 11 percent

The campaign to force hundreds of thousands of homeowners out of Citizens Property Insurance Corp. kicked into high gear Tuesday, as insurance regulators approved a 10.8 percent rate increase and private insurers began sending “takeout” proposals to 210,000 property owners.

The average homeowner covered by Citizens will have to pay an additional $250 when their policy renews next year, and some will have to pay hundreds of dollars more under the rate increases approved by the Florida Office of Insurance Regulation.

Sinkhole rates will increase 25 percent in Pasco and Hernando counties and 50 percent in Hillsborough, costing homeowners between $130 and $375 on average. For condos and rental homes, sinkhole rates will go up 44.8 percent.

The rate hikes — which kick in next year — immediately drew a backlash from critics of Citizens’ aggressive downsizing strategy.

“This is the mentality of Tallahassee — raise rates as high as you can, force people out,” said Sen. Mike Fasano, R-New Port Richey, who has criticized Citizens’ board for unilaterally overhauling the state’s largest insurer. ”Citizens should not be granted any rate increase because they have already given themselves rate increases through the back door.”

The rate increase comes as five different private insurance companies begin plans to take over as many as 210,000 policies from Citizens. Under the “takeout” program, companies began sending letters to homeowners this week offering them an alternative to Citizens. Homeowners have 30 days to opt-out before they are automatically shifted to the private companies.

The push for higher rates and more takeouts is part of an ongoing effort — championed by Gov. Rick Scott — to shrink Citizens and bolster the private insurance market.

In the last year, Citizens has raised rates, reduced coverage, stripped away discounts and increased post-storm deductibles in an multibillion-dollar effort to shred risk and make itself less attractive. The insurer of 1.4 million says its rates are below market value, leaving state taxpayers at risk if a monstrous storm hits.

“Citizens is pleased that Insurance Commissioner [Kevin] McCarty has approved its measured approach to achieving sound rates and reducing the potential financial burden of assessments for all Floridians,” spokesperson Christine Ashburn said in a statement.

Consumer advocates and policyholders decried the multimillion-dollar rate increase as heavy-handed and insensitive to struggling Floridians who have already weathered hundreds of millions of dollars in insurance cost increases.

"This isn’t just a rate hike of more than 10 percent, it’s a rate hike of more than 10 percent after Citizens changed the rules — taking away mitigation discounts, reducing coverage, and changing replacement values,” said Sean Shaw, founder of Policyholders of Florida. “Citizens is getting away with charging more for less and policyholders and our economy are worse off because of it."

In the case of homeowners like Pauline McCoy, Citizens’ aggressive downsizing strategy appears to be achieving the board’s desired result.

McCoy, of Lauderhill, saw her insurance premium nearly double after an inspector came to her home and found that she did not deserve insurance discounts that she was getting. Together with the upcoming 10.8 percent rate increase, her insurance bill is expected to jump by nearly $1,500 next year.

Now, she wants out of Citizens.

“I called my mortgage people, I called my agent and said, ‘Take them off. I don’t want Citizens’,” said McCoy, one of more than 200,000 property owners who have lost discounts during Citizens’ massive and controversial reinspection effort.

McCoy lost her job as a telephone operator in 2008, and has only been able to find part-time work as a home health care aide, where she makes about $10 an hour. She is on the verge of falling behind on her mortgage, she said, and is not sure how she will come up with the extra money to pay for her upcoming policy renewal.

When she heard that private companies were sending letters to more than 200,000 policyholders with offers to take them out of Citizens, McCoy said she would gladly accept if given the chance.

“Citizens has us in a trap,” she said.

But in most cases, shifting to a private company will not lead to lower rates. Citizens is the only insurer in the state mandated by law to cap rates hikes at no more than about 10 percent annually. Despite seven hurricane-free years, private insurers have been raising rates faster than Citizens.

Homeowners who do receive a takeout letter will be automatically shifted to one of five private companies if they do not opt out by Nov. 6. The companies participating in the take out program — Citizens’ largest in many years — are: Florida Peninsula Insurance Company, Homeowners Choice P&C Insurance Company, Southern Fidelity P&C, Southern Oak Insurance Company and American Integrity Insurance Company of Florida.

Citizens originally requested a rate increase of 11.8 percent — the full 10 percent cap plus a little more for various fees and costs. In reviewing the request, OIR pointed out that the Citizens had been cherry picking the highest of three different estimates of annual losses, effectively maximizing the rate increase. OIR decided to use the middle estimate instead, and knocked the rate hike down to 10.8 percent.

Sinkhole rates continued to post the largest increases, despite a 2011 law passed specifically to address the runaway problem of massive losses on sinkhole claims.

Florida’s Insurance Consumer Advocate Robin Westcott pointed out last month that the law, SB 408, has eliminated much of the need for continued rate hikes.

OIR disagreed, saying the jury was still out on how effective the law would be, and granted Citizens a double-digit rate increase.

“Due to the ambiguity caused by the filed claims data, the Office is unable to quantify how much SB 408 will reduce the frequency and severity of sinkhole claims,” McCarty, the Insurance Commissioner, wrote.

Toluse Olorunnipa can be reached at tolorunnipa@MiamiHerald.com or on Twitter at @ToluseO.