TAMPA (CBSMiami) – A plan to raise rates for new policies issued by Citizens Insurance died Thursday for the short term, but the Citizens board asked its staff to create plan for doing that in 2013.
The state’s insurer of last resort says rates are too low to build up badly needed reserves to be used if a major storm strikes, but Citizens has been hobbled by state law which caps annual rate increases at 10%.
Citizens had hoped to get around that by sharply raising the rates for new policies, which when renewed would be capped at at 10 percent raise, but at a much higher starting rate.
“In plain language, a new policy is not subject to the cap,” said Citizens Chairman Carlos Lacasa.
Dan Sumner, Citizens general counsel, defended the insurer’s proposal, saying the Legislature’s underlying intent was for Citizens to become less a player in the property insurance market, which cannot happen as long as the rates remain artificially low – because industry officials say private insurers are less willing to enter the market.
Sumner said residential rates are 43 percent of what they should be. Commercial rates are even less adequate, falling about 75 percent short.
The Citizens board was set to raise rates Thursday at its Tampa meeting, but word of the plan brought a huge outcry, and caused the board to back down on an immediate increase as opposed to a study regarding what rates should be next year.
Thursday’s action brought applause from Sean Shaw, a former Florida insurance consumer advocate who now works with a law firm that represents homeowners.
“Citizens thought they could slide this outrageous rate hike through without policyholders or lawmakers noticing – and they were wrong,” Shaw said.
“You can get all the rhetoric that you want, but the private companies are not coming back to some areas of this state, they’re just not,” said Sen. Mike Fasano said, R-New Port Richey. “Study or no study, if this is pushed or approved you will hurt our economy.”
Lawmakers in 2006 froze Citizens rates following the 2004 and 2005 hurricane seasons, which prompted a surge in claims and led some companies to leave the state, pushing more customers into Citizens.
In 2010, the Legislature, under the leadership of Senate President Jeff Atwater, agreed to cap premium hikes at 10 percent, a level far below what industry officials said was necessary to bring the rates up to private competitors.
In a letter to the board, Atwater said the recommendation went beyond the scope of the 2010 legislation. OIR also said it would look closely at any request, but has yet to see a formal rate request.
The News Service of Florida Contributed To This Story.