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Why Citizens wants to raise your insurance rates

Governor, put down the Big Mac and pay attention.

Asked about a proposed 14% rate hike in homeowners’ policies by Citizens Property Insurance Corp., Ron DeSantis responded by citing the rising cost of fast food. His family of five had just spent $50 or so at a McDonald’s, and he said inflation was everywhere.

For the 1 million-plus Citizens policyholders, insuring the roof over their head is their most pressing inflationary concern — not buying fast food — and that trail of trouble begins in Tallahassee.

The state-owned insurer of last resort, Citizens is asking state regulators to green-light an average 14% rate hike for residential property owners. If the state Office of Insurance Regulation (OIR) approves, policyholders across the state will pay hundreds of dollars more a year in premiums in 2025.

Double-digit increases

In Broward, single-family homeowners would face average increases of $727. Palm Beach County premiums would swell by $657.

Hundreds of thousands of other policyholders won’t face a Citizens bill because they are being rapidly dropped from the state-subsidized insurer’s rolls. They must scramble to find insurance elsewhere, at a higher cost.

This graph provided by Citizens Insurance shows insurance rate changes in private industry and for Citizens customers.
This graph provided by Citizens Insurance shows insurance rate changes in private industry and for Citizens customers.

Citizens’ request for a rate increase comes amid a flurry of sunny-side messaging. It posted a $746 million profit last year. In the wake of legislative reforms, the private market wants to take on Florida customers again. Eight new insurers have entered the market, and eight companies have filed for rate decreases.

But Citizens, which was created by the Legislature in 2002, is not part of that private insurance market. It’s not a true insurance company at all, and the rate hike request reflects that.

Still ‘well below market’

By law, Citizens is prohibited from competing with private insurers. But its low rates and its tax-exempt status give it competitive advantages.

“We’re not trying to jam Citizens’ customers,” Citizens CEO Tim Cerio told the Sun Sentinel Editorial Board. “But the point is, they are paying well below market. If this increase goes through that we’ve asked for, on the whole they will still be paying well below market.”

On paper, Broward policyholders could have seen an increase of less than 1%. Palm Beach County’s increase could have been 9.8%. Citizens could cut rates for its Miami-Dade County policyholders by 4% based on its anticipated losses.

But instead of a cut or smaller hike, all three counties are targeted for double-digit rate increases. Miami-Dade homeowners who might have paid a few dollars less are slated to instead pay an average $691 more.

And Citizens will likely have to keep right on asking for rate hikes. Its own actuaries projected that the insurer would have to charge higher rates than seven out of 10 private companies to meet the non-competition goal.

To borrow the governor’s golden arches analogy, think of it as McDonald’s raising prices until customers take their chances at a mall food court.

‘De-pop’ as a byword

That’s because of another paradox: One of Citizens’ built-in goals is to keep people from being served by Citizens. Shedding policies, known as depopulation, de-pop for short, or shrinking, is a byword at the insurer of last resort.

It was not designed to rescue all comers from a turbulent and costly insurance market — only the most uninsurable. But that was before climate change, which lawmakers all but turned their backs on 20 years ago, generated increasingly violent hurricanes, leaving Citizens to pick up increasingly large tabs for increasingly more Floridians.

Citizens now has about 1.2 million policies and needs to offload hundreds of thousands of them.

If approved, the rate hike is likely to help usher them out the door, even as it creates its own little inflationary spiral.

The Legislature has decreed that a customer who’s offered a policy by a private insurer that’s no more than 20% higher than what Citizens charges for coverage may be involuntarily bumped into the private market.

When Citizens’ rates rise, a private insurer can offer more expensive policies than it does now while staying below the 20% cap. That shoehorns the customer out of Citizens and into the commercial marketplace’s welcoming and more expensive arms.

It is not Citizens’ fault that it’s caught between an actuarial rock and a hard place. It is required to simultaneously insure hundreds of thousands of property owners and drop hundreds of thousands more while shoring up fiscal weaknesses and taking care to not elbow aside private insurers. That’s a Tallahassee-created problem.

But as anyone facing steeper rates can tell you, Florida’s property insurance crisis is far from over. Those being asked to open their wallets yet again deserve better than gee-things-are-tough-all-over commiseration from the governor or spoon-fed rhetoric that relief is right around the corner.

The next Cat 4 could be right around the corner, too.

The Sun Sentinel Editorial Board consists of Opinion Editor Steve Bousquet, Deputy Opinion Editor Dan Sweeney, editorial writer Martin Dyckman and Editor-in-Chief Julie Anderson. Editorials are the opinion of the Board and written by one of its members or a designee. To contact us, email at letters@sun-sentinel.com.

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