State approves 6.3 percent average increase for Citizens policies

Homeowners who have policies with Citizens Property Insurance Corp. will see their premiums rise an average of 6.3 percent next year, the fifth consecutive increase by the state-run insurer.

The average premium increase, approved Monday by the Florida Office of Insurance Regulation, comes on the heels of a 10.8 percent hike approved last year, but is less than the 7.9 percent sought by Citizens as part of its aggressive attempt to shed policies.

Homeowners with standard “multi-peril” lines will pay an additional $111 on average — 4.4 percent higher than current average rates — when their policy renews next year. Those with wind-only residential policies will pay an average increase of $265 more, or 10.5 percent, and businesses with commercial lines coverage will see a 10 percent hike. The new rates do not include sinkhole coverage.

Since 2009, rates have risen 43 percent for Citizens’ standard homeowners policies and officials say the company’s rates are still below market.

The rate increase, which is effective Jan. 1, will apply to fewer homeowners than in the past if 10 private insurance companies succeed in taking over nearly 400,000 policies from Citizens in the next month.

Under the “takeout” program, companies send letters to homeowners offering a private market alternative to Citizens. Homeowners have 30 days to opt out before they are automatically shifted to the private companies in November.

The takeout program, coupled with the decision by regulators to routinely raise rates, is part of an aggressive push by Gov. Rick Scott and the Florida Legislature to make the company less attractive to homeowners.

Citizens is the largest property insurance carrier in the state, with 1.22 million policies, and if it doesn’t have enough money to cover its claims after a massive hurricane, it is required to impose emergency assessments on non-Citizens policyholders throughout the state and surcharges on its own policyholders.

Beginning in January, Citizens will also launch a new program to push homeowners with standard “multi-peril” homeowners policies into private carriers if they receive an offer from a private company. Agents, working on behalf of Citizens policyholders, will be able to comparison shop for the best rates through a clearinghouse run by Citizens.

Consumer advocates, who in the past have complained that Citizens has used back-door methods of increasing rates by reducing coverage, stripping away mitigation discounts and increasing post-storm deductibles, were pleased that regulators rejected the higher rate increase sought by Citizens.

“Initially, my reaction is that this is a good thing,’’ said Sean Shaw, a consumer advocate and founder of Policyholders of Florida. He said that, coupled with the clearinghouse, “this seems to be the beginning of a reasonable approach to shrinking [Citizens] and giving people options.”

But, Shaw noted, customers must be careful and shop around before leaving Citizens to join an alternative company.

That sentiment was echoed Monday by Sen. Tom Lee, R-Brandon in a letter to Citizens President and CEO Barry Gilway and state Insurance Commissioner Kevin McCarty. Lee urged them to provide stronger disclosure warnings that describe “the benefits and risks of remaining with Citizens or being insured in the private market.”

“I’m fine with depopulating [Citizens] but not okay with duping people into abandoning Citizens,” Lee told the Herald/Times. “I’ve become convinced that the disclosures that are being provided to the consumers paint a very rosy picture of the private market — they don’t tell you the whole story.”

For example, the disclosure statements do not tell Citizens customers that their rates could go up an unlimited amount when the policy is renewed. Citizens rates, by contrast, are capped at increases of up to 10 percent a year.

Customers also are not given details as to how the insurance coverage differs between Citizens and the new carrier, what impact the change in coverage may have on the premium, and that once homeowners leave Citizens, “returning… can be a complex and difficult process,’’ he said.

Citizens spokesman Michael Peltier said Lee’s concerns are valid and his letter is being reviewed.

Walter Casey, a homeowner in Spring Hill in Hernando County, said he switched from Citizens after he received a letter last week from a private insurer warning him of “surcharges of up to 45 percent.” Now, he is having second thoughts.

“The letter was really intimidating, saying the assessment was going to go up,’’ Casey said. “I got jumpy and I ran. I was afraid. I’m worried about no coverage.”

Lee emphasized that he supports efforts to reduce the number of policies held by the state-run insurer, but he believes “Citizens should be agnostic” about whether policyholders switch, instead of portraying the switch as favorable and failing to disclose the risks.

The Citizens rates approved Monday include five of the 11 lines operated by Citizens, said Amy Bogner, spokeswoman for the insurance regulator. The department will rule on the remaining rates later this month.

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Mary Ellen Klas can be reached at and on Twitter @MaryEllenKlas

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