Thanks to non-weather related claims, Citizens Property Insurance board approves 6.8 percent average rate hike

Published Jun. 22, 2016

Most Floridians would likely have seen their Citizens Property Insurance rates fall again next year if not for one problem: non-weather related water damage claims.

As a result, policyholders with the state-run insurer of last resort are likely facing a 6.8 percent statewide rate hike.

As expected, Citizens' board on Wednesday unanimously approved the increase, ending a brief respite from higher rates enjoyed by most of its customers outside South Florida.

The filing will be headed to the desk of Florida's new insurance commissioner, David Altmaier, in July. The state Office of Insurance Regulation will likely hold a public hearing in August before acting on the request.

After a decade of hurricane-free years, Citizens has aggressively shrunk its risk and strengthened its finances. Another nagging problem, sinkhole claims, has also abated after the rules for coverage were changed by the Legislature.

But another major obstacle has surfaced in recent years: expensive claims for water-related home repairs that are being filed by contractors and attorneys on behalf of homeowners who have agreed to let them represent them. Typically, the claims are filed after the work has already been done and such cases often lead to litigation.

Property insurers statewide, including Citizens, have unsuccessfully lobbied the Legislature to restrict the legal practice of contractors and attorneys taking over homeowner rights — known as "assignment of benefits" — which they say has been ripe for abuse.

Initially a South Florida problem, it's now becoming more prominent in Tampa Bay and elsewhere in the state.

"This is a crisis — and it's a crisis not only for Citizens, but for the entire industry," Citizens CEO Barry Gilway told the board during a morning meeting in Maitland.

Before the 7-0 vote, board member Gary Aubuchon noted that it could have been much harder on customers if not for a state-mandated cap on annual rate increases. Without that cap, rates could justifiably have gone up 65 percent.

After lawmakers failed to address assignment of benefits last session, "now it comes home to roost," Aubuchon said. "We can't do this alone. We're going to need help from the legislators this coming session."

Mark Wilson, president and CEO of the Florida Chamber of Commerce, is part of the Consumer Protection Coalition that aims to restrict assignment of benefits. He said the spread of the practice statewide shows it "no longer can be ignored and left to fester. We have to act now to put these bad actors out of business.''

If not for the spike in water-damage cases, rates would likely be going down in much of Tampa Bay as they did this year.

Instead, many of Citizens customers in the bay area are likely to see rates rise. Hardest hit would be policyholders in Pasco and Hernando counties, where rates on all personal line accounts — which include standard homes, condos and manufactured homes — would go up 6.7 percent and 4 percent, respectively. In Hillsborough and Pinellas counties, there would be a more muted average increase of 2.1 percent, while rates would drop 2.1 percent in Citrus County.

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For multi-peril homeowner policies, the most common type of Citizens' coverage, rates would rise 7.1 percent in Pasco, 4.3 percent in Hernando and 3.1 percent in Hillsborough. Rates would drop 7 percent in Citrus and stay flat in Pinellas, falling 0.3 percent.

Contact Jeff Harrington at Follow @JeffMHarrington.