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Florida approves Citizens Property rate hikes above 10 percent

Florida's biggest property insurer is getting more than it bargained for.

Florida Insurance Commissioner Kevin McCarty spent weeks dissecting rate hikes sought by board members of state-run Citizens Property Insurance. In the end, he decided they didn't ask for enough.

Rather, McCarty approved a 10.3 percent average rate increase for homeowners covered under Citizens' personal lines accounts and high risk accounts. The carrier, which has about 1.2 million policies statewide, had sought a 9.7 percent average increase.

The commissioner, who also green-lighted two other Citizens' rate increases that were higher than requested, said in a statement late Thursday that "minor adjustments" were made, without elaborating.

Brittany Benner, a spokeswoman in McCarty's office, also gave limited insights.

"I can't go into much detail, but I can tell you the data that Citizens provided to the office justified a slightly higher rate increase than what they requested," Benner said.

"And, yes, an increase in sinkhole claims did factor into us granting higher rate increases."

Last month, McCarty's office launched an investigation into an apparent surge in sinkhole claims outside the traditional "sinkhole alley" in Hernando and Pasco counties. As part of the inquiry, he directed all commercial and residential property insurers to submit data about sinkhole claims opened anywhere in the state from 2006 to 2010.

McCarty on Thursday also approved average increases of:

• 9.2 percent for mobile home owners in the personal lines and high risk accounts. (Citizens had filed for a 7.4 percent increase.)

• 9.1 percent for mobile home physical damage. (Citizens had filed for a 6.1 percent increase.)

For personal lines, the increase is effective Jan. 1, 2011; for high risk accounts, the effective date is Feb. 1, 2011.

Two other requests from the insurer are still pending review.

Benner said she did not know how rare it is for regulators to grant bigger rate hikes than requested, but "it has certainly happened."

Despite the lack of extensive hurricane damage in recent years, Citizens says its premiums are still playing catchup to its costs and that it is facing bigger payouts for nonhurricane damage and sinkhole claims.

Under state law, Citizens is now allowed to raise average statewide rates up to 10 percent annually. The goal is to move Citizens gradually toward charging premiums that are "actuarially sound," in other words, in line with the insurer's costs and risk exposure.

Benner cited technical reasons for exceeding the 10 percent cap on homeowners, saying that Citizens' cash buildup in the Florida Hurricane Catastrophe Fund was not included in the calculations.

Sen. Mike Fasano, R-New Port Richey, said he was told before he voted in the spring that any Citizens increase would be capped at 10 percent, with no more than a 20 percent increase for any individual policyholder.

"Either we were not told the truth, or someone is miscalculating this," he said. "I am really disappointed."

Gov. Charlie Crist was more accepting of McCarty's decision.

Asked about a rate hike higher than an initial request, Crist said, "I would prefer that that wouldn't be the case, obviously, especially during these economic times. Less is better, in my view."

Yet Crist left the decision in the hands of his top insurance regulator. It was justified, he said, "if it's necessary in order to be sure that coverage continue to be provided."

The role of Citizens in Florida's precarious property insurance market has been a keen topic of debate in the gubernatorial campaign.

Republican candidate Rick Scott maintains Citizens should be allowed to charge actuarially sound rates and that, under free market competition, prices will come down.

Democratic candidate Alex Sink advocates keeping Citizens' 10 percent cap in place.

Both candidates want Citizens to return to its original mission as insurer of last resort. The company, which insures those who cannot find coverage in the open market, has turned into insurer of first resort in many cases. It has received an influx of thousands of policies from private insurers cutting back their hurricane exposure in Florida.

McCarty, who runs the Florida Office of Insurance Regulation, has been sympathetic to insurers' pleas of higher costs, particularly involving an increase in sinkhole claims.

Over the past year, he has approved numerous rate increases, some in the double digits.

Most recently, the commissioner earlier this month approved average rate increases of 19 percent and 18 percent, respectively, for two subsidiaries of Allstate selling insurance under the Castle Key name. He also allowed Allstate to eliminate certain voluntary discounts, which could result in a higher premium for some of its customers.

Times staff writers Becky Bowers and Michael C. Bender contributed to this report.

Fast facts

Rate increases

Citizens Property Insurance Corp. average rate increases announced Thursday go into effect Jan. 1 for personal lines and Feb. 1 for high risk accounts.

Personal lines accounts and high risk accounts

Homeowners: 10.3% (Citizens asked for 9.7%)

Mobile home: 9.2% (Citizens asked for 7.4%)

Mobile home physical damage for personal lines accounts and high risk accounts

Mobile home: 9.1% (Citizens asked for 6.1%)

Source: Florida Office of Insurance Regulation

Florida approves Citizens Property rate hikes above 10 percent 09/23/10 [Last modified: Thursday, September 23, 2010 11:35pm]
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