Citizens Property Insurance should be allowed to end its three-year rate freeze and start aggressively hiking homeowner insurance rates as soon as next January, a state task force recommends.
The panel, which is studying the mission of the state-run property insurer of last resort, voted unanimously Tuesday to recommend the Legislature cap Citizens' annual rate increases at 10 percent on average statewide. It also suggests an annual cap of 15 percent for any given territory and 20 percent for any single policy.
The rate increases could hit coastal homeowners and condo policyholders the hardest.
"They need to be paying more. . . . The question is how rates go up in a way that's affordable and politically digestible," Bruce Douglas, task force chairman and former Citizens Property board chairman, said during a meeting Tuesday at the Marriott Hotel at Tampa International Airport.
Task force members are urging the state to allow Citizens to begin raising rates as soon as possible after Jan. 1, 2010.
Citizens has to file a rate case with the Florida Office of Insurance Regulation in July. Given that a double-digit rate hike was revoked when the rate freeze went into effect, Douglas believes Citizens could justify rate hikes higher than the caps for several years.
The 10 percent average hike is viewed as a way to ease the pain.
"This is all about limiting the rate increase,'' said Belinda Miller, Florida deputy insurance commissioner and a task force member.
Two other task force members agreed that without the caps, policyholders could face much higher premiums. Locke Burt, a former state senator who runs Security First Insurance in Ormond Beach, said the average Citizens' condo policyholder now paying about $700 would face a maximum increase of about $140 under the cap.
"It's a lot better than $1,400, which could have been the (new premium)," added Tampa Lawyer William F. "Chip" Merlin.
Despite ongoing efforts to entice private insurers to take high-risk policies back on the market, Citizens Property remains Florida's largest insurer with nearly 1.1-million policies carrying $412-billion in exposure to catastrophic risk.
In recent years, Citizens has become a popular dumping ground for policies by agents with customers having little incentive to shop around. In part due to the rate freeze, its rates are often cheaper than private marketplace options, and its service and reputation are viewed by some as stronger than insurance start-ups bidding to take some of its policies.
The task force's mandate is to find ways to let Citizens get back to its roots as a last-ditch insurer that property owners would want to avoid if possible. The most obvious way, Douglas said, is raising rates high enough to become noncompetitive again.
But the task force is also recommending the Legislature consider other steps, such as:
• Not writing new Citizens policies for erosion-prone coastal areas based on state and federal guidelines.
• Making incoming policyholders and their agents sign certifications that they could not find coverage in the marketplace, or the only offer is more than 15 percent higher than Citizens' rates.
The task force punted on one of the more contentious issues, tabling debate on whether Citizens policyholders should have the right to object if a private insurer wants to take their policy out of Citizens.
Currently, property owners can "opt out'' of having their policy taken out of Citizens by a private insurer. Between 30,000 and 40,000 Citizens policyholders, or roughly 10 percent of those eligible for a "take-out,'' have objected. Some are concerned about the financial stability or track record of the insurance company.
Chiding policyholders who consider Citizens as a "lifetime benefit,'' Jason Schupp, an executive with Zurich American Insurance Co., supported Burt's suggestion that someone who refuses a take-out offer be nonrenewed and forced to shop around before re-entering Citizens.
Merlin initially supported taking away policyholder choice, but said he was swayed by testimony indicating some take-out companies misled consumers by offering less coverage than Citizens, albeit at a comparable price.
Scrambling to meet a Jan. 31 deadline to submit its report to the Legislature, the task force has slated what it hopes is its final meeting for Jan. 22 in Jacksonville.
Jeff Harrington can be reached at email@example.com or (727) 893-8242.