The insurer of last resort in Florida isn't meant to be competitive. But if it were, its average premium for regular homeowner's insurance would have to almost double.
Citizens Property Insurance policies continue to be significantly underpriced compared to private carriers, according to a company presentation to state regulators earlier this month. It estimates the average homeowner's insurance premium would need to be increased by 96.8% to better match competitors.
The increases needed in South Florida counties — where Citizens policies are concentrated — would be slightly lower. Yet the wide gulf between Citizens' premiums and others shows just how fast private insurance rates have jumped compared to Citizens' rates, whose annual increases are capped by state law.
"Our rates remain, for the most part, actuarial unsound and highly competitive around the state," said Citizens CEO Tim Cerio Aug. 1 to the Florida Office of Insurance Regulation. "As a governmental insurer of last resort we should never be competing with the private market."
The company is asking state regulators to approve an average increase of 13.5% for the standard homeowner's insurance, known as HO-3. State law allows Citizens to raise its rates no more than 14% for policies beginning in 2025.
As the state-backed home insurance company, the insurance premiums charged by Citizens aren’t meant to be competitive with other insurance companies. And they’re not by a lot.
The gap between what Citizens charges to protect a Florida home and what private insurers charge has grown. In 2022, Citizens' premiums were 44% below many insurers. The difference more than doubled for policies in 2023 as private insurers had much larger price hikes approved compared to the limited increases allowed for Citizens.
"We know the glidepath exists," said Citizens Chief Actuary Brian Donovan at its rate change hearing this month.
The glidepath is the maximum amount Citizens can increase its premiums as prescribed by state law. The idea is to glide Citizen’s premiums closer to the competitive rates to close the gap between what it charges and what homeowners can find with private insurers.
The glidepath cap of a 10% annual hike was increased by 1% per year beginning in 2022. It is due to reach the new annual limit of 15% annual increases in 2026.
As a state-backed insurer, Citizens can levy a fee on Floridians if it gets into financial trouble.
"Being less competitive is simply the only way to reduce Citizens size. A smaller Citizens is needed, of course, to avoid assessments on Floridians," Cerio told regulators.
Home insurance in Monroe County
The Florida Keys is a special case for Citizens windstorm insurance. It is the only firm offering insurance coverage for hurricanes for homeowners in Monroe County.
"There is no competition in Monroe County. Citizens is our insurer of last resort, and so they're not competing with anyone here," said Caroline Horn with Fair Insurance Rates in Monroe County. FAIR advocates for home insurance in the Keys.
"What we'd like right now is no increase," Horn told WLRN.
Citizens wants to boost its hurricane home insurance premiums by 14.6% statewide. In Monroe County, it is asking state regulators to approve a 16% jump, bringing the average wind-only premium for homes in the Keys to more than $7,000 – the second highest in the state. The average premium for hurricane coverage for condos in the Keys would jump almost 20% to more than $2,700, under Citizens' proposed rate changes.
The number of homes, condos, mobile homes and buildings insured by Citizens has grown significantly since 2020. It had more than 1.2 million policies at the end of July. Most of those are in South Florida. That also means most of the insurance policies identified for the company's depopulation efforts are in South Florida.
Depopulation is Citizens' strategy of moving homeowners to a private insurance company if a private policy is no more than 20% more expensive that what Citizens charges. Almost 200,000 policyholders have been notified this year.
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