Florida homeowners renewing their policies this year with Citizens Property Insurance Corp. might see an increase in their rates.
The state-backed insurer of last resort filed a public rate hearing request in November, asking for an average increase on its policies of 14% — the maximum allowed. It’s part of a plan to make private insurance companies more competitive, allowing more people to leave Citizens and take policies in the private market.
The rate hike follows the course of action set by the Florida Legislature in 2021, which says Citizens' annual rates should increase 1% each year. Citizens’ rates went up 11% in 2022, 12% in 2023 and 13% last year.
The 14% rates were set to kick in Jan. 1 on new policies and policy renewals this year. This was approved by the Citizens board, but the state Office of Insurance Regulation has the last say — and has yet to reach a decision.
At a state Senate Banking and Insurance Committee meeting Tuesday, Florida Insurance Commissioner Michael Yaworsky said the industry did “pretty well” in 2024, even after three hurricanes and a record-setting number of tornadoes.
He credited the previous two years of insurance legislation reforms, such as restricting litigation against insurers, increasing Citizens’ rates annually and launching its depopulation program.
“We are seeing improvement,” Yaworsky said. “Stability has emerged throughout the marketplace.”
According to Yaworsky, had these policies not been in place, the storms could have driven Citizens into insolvency, meaning it could not pay its debts.
How do rate hikes prevent collapse?
Citizens is state-funded, meant to serve as an insurer of last resort for risky homes uninsurable through the private market.
But Lisa Miller, CEO of Lisa Miller and Associates and the OIR’s former deputy commissioner, said that’s not what’s happened.
“It should be expensive, bare bones and have hardly any customers,” Miller said. “Instead, private insurers kept raising prices, while Citizens’ rates remained very low, which is backward.”
In 2023, Citizens became the largest policyholder in the state, and the largest backstop insurer in the country, peaking at 1.4 million policies.
Citizens reported a massive risk exposure gap, with about $900 billion in liability. In the event of large-scale catastrophe, the company wouldn’t have enough money to cover the claims.
In such a case, the state has ruled, Citizens can levy assessments on Floridians for years. This is what’s more commonly known as a “hurricane tax.”
Citizens spokesman Michael Peltier said these rate hikes are designed to prevent that from happening.
“Citizens' rates continue to be artificially low,” Peltier said. “As the state’s insurer of last resort, it’s important that Citizens seeks rates that cover its risk.”
So, what’s the holdup?
In its November request, Citizens said it would need to nearly double rates to even come close to private insurers', illustrating how much more expensive private market insurers are, the risk Citizens is taking on and what it will take to restore economic balance.
“This commissioner is very deliberate,” Miller said. “He wants this done right, so it would make sense that he's taking his time.”
The state requires insurance companies to file public rate hearings each year. This means the OIR is reviewing each one, not just Citizens’.
According to Miller, while some of these filings can be short or ask for zero increases — even rate decreases — others request a lot, and many are thousands of pages long.
“I've seen these rate filings and how complicated they can be. [The commissioner is] going to make sure that the review is correct, that the numbers that they come to, in terms of whatever percentage is granted or not, are the right decision,” Miller said.
Mark Friedlander, director of corporate communications at the Insurance Information Institute, a data-driven industry group, said the rate hikes will help the market whenever they come.
“Citizens rate request is an essential component of the ongoing stabilization of the Florida home insurance market. Citizens needs to be allowed to charge actuarially sound rates versus offering coverage at below-market discount rates. It needs to stop competing with private insurers and be a true insurer of last resort as intended,” he said.
Depopulation is the answer
Last year, Citizens launched a depopulation program, encouraging other insurers to make so-called “takeout” offers that could drive Citizens policyholders into the private market.
If a homeowner receives an offer within 20% of their current rate, they must accept it and make the switch. But Friedlander said hitting that mark can be challenging for private insurers trying to match Citizens' extremely low rates.
“What we’re hearing is policyholders are rejecting the takeout offers because they're too expensive,” he said. “Citizens is very rate-restricted, so when they implement rate increases, they’re typically well below the private market because they have a state-regulated cap. Private insurance companies can’t do that, even if they wanted to, because it's just unsustainable.”
A rate increase makes the private market more competitive, aiding in the depopulation process.
Like Yaworsky, Friedlander said recent policy changes have fared well, attracting more private insurers to the Florida market, which increases and diversifies the pool of depopulation participants. He said he expects prices to hold steady in 2025.
An approval from OIR would mean private insurers get some wiggle room to make more reasonable and profitable takeout offers; while Citizens gets to dodge insolvency; and Florida homeowners keep paying the nation’s highest —and still increasing— insurance premiums.
Lillian Hernández Caraballo is a Report for America corps member.
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