Citizens Delays Vote on 55 % Rate Increase
The state's insurer of last resort decided Thursday to delay a vote on whether to increase its homeowners rates an average of 55 percent, following requests from lawmakers to wait until after a special legislative session next month.
The decision by Citizens Property Insurance Corp.'s board of governors means a reprieve at least for 980,000 of its customers. The January special session will be Florida's latest attempt to tackle the problem of skyrocketing insurance rates.
But board chairman Bruce Douglas warned that regardless of the lawmakers' actions, Citizens will be forced to increase insurance rates.
'Premiums are not going to go down. We are not going to give people false expectations,' Douglas said.
But he said increases could be spread over three to five years to give people time to 'digest it.'
'It's not just an insurance issue. The economy of the state of Florida is the issue,' said Jay Odom, a board member.
The state-created Citizens sells wind coverage to homeowners who can't get it from private insurers. The board first said it had to approve the increase because of a law passed this year. It requires Citizens to charge rates high enough for it to buy private backup reinsurance, even though it doesn't purchase such coverage.
But the board heeded calls from House Speaker Marco Rubio and others for the delay. Several lawmakers said the Legislature may repeal the part of the law on backup coverage at the special session.
Rubio and Gov.-elect Charlie Crist did not immediately return calls seeking comment on the delay.
'They are going to take prudent, responsible action,' predicted Douglas. 'I'm hopeful the Legislature will give us relief and the people of Florida relief.'
At the meeting, Douglas read a letter from state Sen. Jeff Atwater, R-North Palm Beach.
'Floridians can not withstand another hike of property insurance costs,' Atwater wrote. 'The dream of the young Florida family wishing to buy a house is rapidly disappearing. Retired Floridians, despite every heroic effort they are making, now fear the prospect of giving up their home.'
The Legislature passed the new requirements for Citizens on the last day of the session last spring. It required that Citizens be able to pay claims for a 70-year-storm without having to assess customers of private-market insurers.
The new requirements include charging Citizens customers for reinsurance, or backup coverage for insurers, at an estimated cost of $775 million.
During the 2004 and 2005 hurricane seasons, Citizens reported $2 billion in deficits. A large part of that was offset when lawmakers used $715 million of taxpayer money to partly bail out the company this year. The rest of the shortfall is being picked up by all Florida homeowners, through surcharges that will be on their insurance bills for the next decade.
Alex Sink, the incoming chief financial officer, urged lawmakers Wednesday to roll back the rate hikes.
'Folks, we are in a situation where the rate increase, as proposed, is going to destroy our economy. That provision needs to be repealed.'
Sink asked lawmakers to come up with another $700 million to cover the remaining deficit not covered by the $715 million appropriation.
'Tell Floridians we are not going to be subject to these assessments going forward,' she told House members in Tallahassee.
Crist said earlier this week that the proposed rate increase 'scares the daylights out of people,' and that he is glad the Legislature plans to take up the issue, although he didn't specifically call on Citizens to delay the rate hike.
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