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Property insurance rates could go through roof under Senate bill

An aerial shot shows the destruction of a mobile home community in the Homestead area by Hurricane Andrew.
An aerial shot shows the destruction of a mobile home community in the Homestead area by Hurricane Andrew.
Published Apr. 11, 2013

TALLAHASSEE — As a complex property insurance bill has cruised through the Florida Senate, lawmakers have heard several frightening figures detailing what would happen to the state after a massive hurricane: More than $9 billion in "hurricane taxes," $100 billion in damages and untold wreckage on family budgets across the state.

Those numbers, mostly inflated, have taken center stage during the debate over SB 1770, but the cost of future premiums to individual property owners, especially "new" Citizens Property Insurance customers, has largely been ignored — until this week.

Insurance bills could soar more than 60 percent under the Senate bill in certain areas of the state, including South Florida and Tampa Bay, according to Citizens president Barry Gilway.

"We need rate adequacy in the state," Gilway said Tuesday, warning that rates need to triple in some areas before they are "actuarially sound."

It was the first time anyone had publicly discussed the actual size of rate increases required by the 96-page bill, despite several hours of public testimony and five committee hearings. Lawmakers will debate the bill on the Senate floor today. The House version is made up of several different bills and is still under review.

If the bill passes in its current form, insurance rates for a new policy with Citizens could increase by as much as 50.8 percent in parts of Pasco County; 15.2 percent in parts of Hillsborough County; 73.2 percent in parts of Pinellas County; and 73.3 percent in parts of Hernando County. Some areas would see smaller increases. Sinkhole rates in places like Hernando County could nearly triple and wind-only policies would see some of the largest hikes.

The backlash normally sparked by insurance bills with such large rate increases has been nonexistent in the debate over SB 1770, which has received bipartisan support. But those large rate increases have never been fully disclosed during debate over the bill.

Supporters say the bill shields current customers from the largest rate hikes, and only new Citizens policyholders would pay the higher rates. But that includes people who get dropped by their insurance companies and forced into Citizens, and people who get dropped by Citizens and need to rejoin.

The bill forces homeowners out of Citizens if a private company is willing to cover their home for 15 percent more than what Citizens is charging. If the private insurer later increases rates at renewal — as several "takeout" companies have done in the past — the homeowner would not be able to go back to Citizens at the previous rate. The homeowner would be considered a "new" customer.

There were more than 130,000 "new" Citizens policies in Tampa Bay and South Florida last year.

With no elections this year, legislators are pushing for more insurance reforms, and SB 1770 could cause insurance rates to go up even faster.

Gov. Rick Scott, who faces re-election in 2014 (when many of the rate hikes would kick in), has weighed in, saying that lawmakers should slow down. He wants current customers to be shielded from rate hikes above the current 10 percent cap.

"The governor wants to keep the cost of living low for Florida families while reducing the risk of all home and auto insurance policyholders paying a hurricane tax in the event of a major storm," said spokesman John Tupps. "Any final legislation the governor signs must meet both of these goals."

Rather than focus on the numbers that show massive rate increases across the state, the bill's supporters have highlighted other numbers showing the devastation that would be caused by a once-in-a-lifetime hurricane.

"If the hurricane doesn't even go through your area, your constituents will be assessed upwards of between $2,000 and $5,000 per year," Sen. David Simmons, R-Altamonte Springs, told lawmakers last week as he presented the bill.

Citizens clarified that Simmons was using inflated 2012 figures that are no longer valid. According to Citizens, a 1-in-100-year megastorm would result in assessments of about $280 for non-Citizens policyholders. Citizens is authorized to levy assessments, or "hurricane taxes," on consumers across the state to cover a shortfall.

The state-run company has reduced its risk load significantly over the last year, meaning hurricane taxes are much less likely this year than they were in 2012.

Gilway pointed out on Tuesday that Citizens has enough money — after seven years without a hurricane — to pay for a 1-in-50 year storm. That's basically a storm as powerful as Hurricane Andrew, which only has a two percent chance of occurring in a given year. It would take two of those storms, or a monster 1-in-100-year storm, to wipe out Citizens' resources and force multibillion-dollar hurricane taxes.

While the threat of hurricane taxes has declined significantly since last year, lawmakers are talking more about them as they push for sweeping reforms.

In 2012 — an election year for all 160 lawmakers — the Legislature opted against major insurance reforms (and new rate hikes), a move that could endanger upcoming re-election bids. Citizens, under significant pressure from Scott, opted to make reforms on its own, and the unpopular decisions made by the board have helped reduce the company's risk substantially.

Those decisions have cost homeowners more than $450 million in higher insurance costs in the last year alone.

"This is causing me a tremendous nervous breakdown," Carlos Eagen, a 77-year-old retiree in Miami, said of his $2,100 rate hike. "They are going to kill me. They're killing the middle class."