Citizens Property Insurance Corp. could face dire consequences if it fails to involve Florida lawmakers before deciding whether to approve a dramatic rate increase for new policyholders, the state-backed firm’s board chairman warned Thursday.
The corporation’s Board of Governors is scheduled in July to consider raising rates on policies for hurricane damage and other perils an average of nearly 55 percent in coastal areas and 19 percent in inland regions for those who buy coverage for the first time after Jan. 1.
That could add about $100 million to Citizens’ annual balance sheet. Citizens is Florida’s largest provider of property insurance, mainly for homeowners, with 1.45 million policies, but corporate officials say it doesn’t bring in enough money to cover losses if Florida should sustain serious hurricane damage.
Board Chairman Carlos Lacasa, a former Republican legislator, told the board’s Actuarial and Underwriting Committee what to expect if lawmakers are left out of the discussion.
“They will pass legislation that undoes what we do or prevents us from moving in that direction in the future,” Lacasa said during the conference call meeting. “And then we have yet that much more of our hands tied behind our back. This has to be a very deliberative process.”
Several lawmakers and consumer advocates have criticized the plan, which would circumvent a 10 percent cap on rate increases ordered by the Legislature. The argument for the proposal is that starting new policies at a higher rate is not an increase for those policies.
Board members criticized news media reports on the proposal and the opposition to it. Lacasa said it’s been “explosive” and “exaggerated.” John Rollins called it “media hyperventilating.”
Lacasa, though, also reminded panel members what happened when Citizens last year asked for an increase of more than 400 percent for sinkhole coverage. State regulators approved only a 32.8 percent increase after an outcry by lawmakers, customers and consumer advocates.
That episode tarnished Citizens reputation and credibility, Lacasa said.
“I hate to see a very well-run institution with great performance metrics for our policyholders be compromised by the publicity that follows bad planning and lack of collaboration with other stake-holders like the Legislature,” he said.
Citizens Chief Financial Officer Sharon Binnun responded by saying the corporation would hold a workshop on or about July 16 to let lawmakers and others have their say before the board meets on July 27.
Gov. Rick Scott and many other Republican politicians have been pushing Citizens to increase its revenues and reduce its customer base.
They point out that if the company doesn’t have enough money to cover claims, it can make up the difference through assessments against most other insurance customers, including automobile policyholders.
Citizens was created to provide an alternative for residents who could no longer get coverage from private companies, which have pulled out of the state or reduced their customer base because of the hurricane risk.
The rate cap, though, also has attracted customers because Citizens’ rates now are lower than similar coverage from many private companies.
Citizens has been exploring ways to “depopulate” by switching customers to private companies.
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