SARASOTA– New customers face price increases up to 30% to insure their property through the state-run insurance plan, Citizens Property Insurance Corp., if a controversial plan to uncap rates for new customers is passed.
The plan is part of Citizen’s aggressive push to reduce risk and shrink in size. A 10 percent cap on rate increases put into place by the Florida Legislature in 2009 has resulting in an underfunded system that could potentially bankrupt the state if a catastrophic storm were to hit one of Florida’s major metropolitan cities.
While private companies have been forced to raise property insurance rates due to the rising cost of re-insurance, insurance that is purchased by an insurance company, Citizens has become the cheaper option especially for waterfront homes which are most at risk. In some areas, new policyholders could face premiums twice as high as their neighbors.
Citizens sees uncapping rates as a way to make state-run insurance less attractive when compared to the private market. Citizens was never intended to be the cheapest option in fact it was created as the insurer of last resort but, with rate increase caps in place they have become the most economical choice which is potentially a financial disaster for the State. With more than 1.4 million policyholders, the bulk of whom are located in South Florida and the Tampa Bay area, Citizens is Florida’s largest property insurance company.
Gov. Rick Scott has requested the board of Citizens look for ways to reduce exposure and shore up finances. Estimates suggest the plan would produce $100 million in additional revenue each year, with average premium increases of 30.5% for new customers. In some counties, new customers account for as much as 70 percent of all of Citizens’ business in recent years.
Citizens is also considering plans to automatically drop certain high-rick property owners — in sinkhole-prone counties, for instance — and then re-approve them after an inspection or renovation. They would then be considered new customers and offered the “new customer” rate, resulting in higher premiums.
While this plan of course outrages many homeowners, state legislators can not continue to kick the can down the street and avoid the financial strain Citizen’s is placing on the State. Legislators across the country must finally address the unrealistic promises they have made and make the hard choices necessary to keep us all afloat.