Florida OIR Tells Citizens to Rethink Maximum Rate Increase on HO Policies

By | August 22, 2023

When Citizens Property Insurance Corp. in June filed for the maximum rate increases allowed by its statutory glidepath, many in the Florida insurance industry saw it as a good thing, needed to help steer policyholders back toward the beleagured primary market.

Today, at least some in the industry are scratching their heads after Florida Insurance Commissioner Michael Yaworsky struck down part of Citizens’ 12% average rate increase request on homeowners’ policies, ordering the state-created insurer to come back with a new proposal within 30 days.

The proposed, overall increase exceeded the glidepath, Yaworsky’s order explains. But one insurer executive said the order may have gone too far and some personal lines increases could have been approved.

“I was surprised, because given the data that’s come from Citizen’s leadership and their board, it seems clear that Citizens’ policies are underpriced and a rate increase is justified,” said Melissa Burt DeVriese, president of Security First Insurance Co., the 12th-largest property insurer in Florida.

With Citizens’ rates limited by law, premiums are significantly lower in many parts of the state, which has caused the residual insurer to become the largest carrier in the state with more than 1.3 million policies in force. Without the larger rate increase, primary market carriers will continue to find it difficult to compete with Citizens, DeVriese said.

Citizens now has until mid-September to come back with a smaller proposed rate increase on personal property, although Yaworsky’s office approved the requested increase for some commercial properties.

Yaworsky signed the orders late last week.

“The Office finds that due to the inadequate support as it relates to Citizens being non-competitive … rates should be subject to a modified policyholder capping methodology with the lower cap of 0% and an upper cap of +12%, until such time that Citizens can provide support in a subsequent rate filing,” the Aug. 18 order reads.

Dwelling fire and mobile home proposed rate increases also must be revised, Yaworsky’s order notes.

The Office of Insurance Regulation did not provide further comment Tuesday morning on the reasoning behind the denial order, but said more information may be released later. Kevin Comerer, a former lobbyist for a Florida insurer, noted that OIR had little choice.

“Everyone wants Citizens’ rates to be comparable, but OIR was simply interpreting the law and implementing rates based on the statutes,” Comerer said Tuesday. “They have to follow actuarial science and they have to follow the law.”

He argued that a more limited Citizens’ rate increase will have little impact on the market, compared to the effect from sweeping legislative reforms approved late last year, designed to stem the vast amount of claims litigation that has plagued insurers in recent years.

It’s not uncommon for regulators to ask insurers to reconsider or to provide more information, even on seemingly straightforward math questions.

“It’s part of the process,” said Citizens’ spokesman Michael Peltier. “There’s always room for interpretation.”

Revised filings don’t always follow the script. Last year, for example, the Florida OIR asked Florida Farm Bureau to revisit its request for a 41% rate increase. The insurer did that, and came back a few months later with an even larger rate request.

On the recent Citizens filing, it’s possible that regulators also heard an earful from irate policyholders, many of whom have seen private carriers leave the market and raise premiums significantly in recent months. The OIR held hearings on the Citizens proposal and received some 724 written comments from the public, Yaworsky’s final order notes.

For condominium associations in Citizens’ commercial lines account, Yaworsky did approve a 9.2% average statewide rate increase, effective Oct. 1. For other commercial residential property, the order OK’d a 9.5% rise. For non-residential commercial property, Citizens’ proposed 7.7% increase also was approved.

The homeowners’ rate order can be seen here. The commercial and condo order can be seen here.

The OIR orders come just a few weeks after the office and carriers announced that primary market insurers so far this year have requested more than 350,000 takeouts from Citizens. It was unclear Tuesday how or if a smaller-than-expected Citizens rate increase will affect the number of policyholders that agree to the takeout offers.

Topics Florida Trends Pricing Trends

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