TALLAHASSEE, FL—Florida's state-backed Citizens Property Insurance Corp. has proposed a 13.5% rate increase for its policyholders, a move that could significantly impact homeowners across the state. The proposal, if approved, would raise the average rate for Citizens' customers from $3,560 to $4,041. However, Citizens officials have stated that a staggering 93% increase would be necessary to match the competitive market truly.
"Brian Donovan, Citizens' chief actuary, said in a hearing last week that this would increase the average price of homeowners multi-peril policies, the insurer's most common type of policy, from $3,560 to $4,041.
Other types of policies would also see increases in varying amounts in the double digits. But he added that rates for Citizens' personal multi-peril policies would need to increase by 92.8 percent to be non-competitive."
This disparity between the needed and proposed rate hike reflects the ongoing crisis in Florida's property insurance market. The state has been plagued by a series of factors contributing to soaring premiums, including:
Increased litigation: Florida has seen a surge in insurance-related lawsuits, driving up costs for insurers.
Natural disasters: The state's vulnerability to hurricanes and other natural disasters results in higher risk and, consequently, higher premiums.
Reinsurance costs: Insurers purchase reinsurance to protect themselves from catastrophic losses. Reinsurance rates have been on the rise, adding to the overall cost burden.
The Current Hike and Its Implications The proposed 13.5% hike is part of Citizens' ongoing efforts to stabilize its financial standing and ensure it can cover claims in the event of major storms. This increase is seen as a necessary step to push policies into the private market, potentially reducing the number of policies held by Citizens. Citizens insure over half a trillion dollars worth of property, a figure that could significantly decrease if the rate hike is approved.
While the proposed 13.5% hike may seem steep, Citizens Property Insurance Corp argues that it is necessary to keep pace with rising costs and to reduce the insurer's reliance on assessments, which are essentially taxes on all insurance policies in the state. The insurer has been operating at a deficit, largely due to the high frequency and severity of hurricanes and other natural disasters in Florida.
However, the insurer's own analysis suggests that even the proposed 13.5% hike may not be enough to bring its rates in line with the competitive market. According to Citizens, a 93% rate increase would be needed to match the rates charged by private insurers in the state. Such a drastic hike would likely devastate many Florida homeowners who are already struggling to afford insurance coverage.
Florida's Skyrocketing Insurance Rates Florida homeowners are already struggling with the highest home insurance rates in the country. In 2023, the average annual premium for Florida homeowners was $10,996, compared to the national average of $2,377. This disparity highlights the unique challenges faced by Florida residents, including the state's vulnerability to hurricanes and other natural disasters, which drive up insurance costs.
The Path Forward As the OIR considers the proposed rate hike, lawmakers and regulators are facing growing pressure to address the underlying causes of Florida's insurance crisis. These include the high frequency and severity of natural disasters, as well as the state's unique insurance market, which is characterized by a high level of litigation and a lack of competition.
A final decision on the proposed 13.5% rate increase, expected by August 23, 20241, could further strain Florida homeowners' budgets. If approved, the new rates would take effect in 2025, adding to the already significant financial burden that Florida homeowners bear, paying significantly more than their counterparts in other states.
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