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.
Data shows the different counties in which Citizens Property Insurance is seeking significant premium increases to align closer with private insurers.
“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.
Data show that the proposed 2025 average citizen’s windstorm insurance premiums show a significant increase.
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.
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.
This story was produced by WLRN, South Florida’s only public radio station at 91.3 FM, as part of a content sharing partnership with The Miami Times. Read more at WLRN.org.
Alice J. Roden started working for Trending Insurance News at the end of 2021. Alice grew up in Salt Lake City, UT. A writer with a vast insurance industry background Alice has help with several of the biggest insurance companies. Before joining Trending Insurance News, Alice briefly worked as a freelance journalist for several radio stations. She covers home, renters and other property insurance stories.