Insurance: First showdown on Citizens' premiums Thursday
Thursday promises to be the first showdown over the prices that Anna Maria Island property owners will have to pay for wind coverage next year from Citizens Property Insurance Corp., the state's insurer of last resort.
Thousands of dollars are at stake for policyholders in this ongoing drama.
A commercial wind policy that now costs $1,276 for an Island business owner would jump to $11,073 under the proposed rate schedule. An Island residential property owner now paying $1,000 for wind coverage would pay $1,085 to $2,275, depending on how close the property is to water.
Citizens now provides wind insurance for more than 18,000 homeowners in Manatee County, many of them in or near the high-risk areas of Holmes Beach, Bradenton Beach and Anna Maria City. Citizens also insures 163 commercial properties located inside the state-designated wind pool on Anna Maria Island and the Manatee County portion of Longboat Key, and five commercial-residential properties outside the wind pool.
The actuarial and underwriting committee at Citizens has recommended increases ranging from 8.5 percent to 767.6 percent to take effect in March, in keeping with a state law passed earlier this year.
But those recommendations have to be approved by the Citizens board of governors, which convenes at 9 a.m. Thursday in Gainesville. And the heat on the board to tone down or eliminate the proposed rate hikes has been growing in recent days after a firestorm of complaints from policyholders and politicians.
Citizens board chairman Bruce Douglas has already announced his opposition to the recommended increase because of the impacts on the state economy and consumer pocketbooks.
"Senate Bill 1980, passed in May, requires the higher rates that have been proposed," said Citizens spokesman Rocky Scott. But chairman Douglas will have an opportunity at the board meeting to argue against them, Scott said. And Douglas has made it very clear in his comments about the proposals that he wants to be on the policyholder's side in this fight.
If the board majority wants to go forward with the recommended rate increases over Douglas' objections, there are two more checkpoints where the increases could be eliminated or reduced.
One would be at the Florida Office of Insurance Regulation, which must approve the Citizens rate increases before they can be implemented.
The other checkpoint would be the Florida Legislature, which assembles Jan. 16 in Tallahassee for a special session to try and find solutions for the state's insurance crisis.
State Rep. Bill Galvano, who represents western Manatee County, said that he hopes the special session will "do something" about the proposed Citizens rate hikes if they still pose a problem at the point the session convenes.
"Whatever we do should be retroactive in application so we have the most timely effect for people," Galvano said.
Some legislative leaders are saying the problem with the Citizens rate proposal is that its actuaries misinterpreted Senate Bill 1980, the controversial state insurance law approved in May.
That law requires Citizens to include the cost of reinsurance (insurance for the insurers) in its rates even though Citizens does not have to buy reinsurance. The requirement was to help Citizens build up a surplus and create an insurance market environment that would encourage standard insurers to write more policies in Florida.
But state Rep. Don Brown, a Defuniak Springs insurance agent, is quoted in a recent Tallahassee Democrat story as saying that Citizens based its rate hikes on the reinsurance market for 2006, when reinsurance costs were at their highest, rather than using a lower, five-year average or "blended" cost.
Another important component in the Citizens commercial rate-setting, according to spokesman Scott, was the effort Citizens had to make to match the higher rates charged by the Florida Property and Casualty Joint Underwriting Association (FPCJUA).
The state established the PCJUA in August to sell wind coverage to small businesses that are unable to find coverage in the regular insurance market and are not eligible for Citizens.
Policyholders who have suggestions for Citizens can now submit their comments electronically to a new Web site at www.CitizensForABetterCitizens.com.
The new site was launched Nov. 27 by the Florida Office of Insurance Regulation as a way to collect public comment on how Citizens can improve customer service and operate in a more efficient manner.
Citizens rate summary
Citizens Property Insurance Corp. now has 18,531 residential and commercial policyholders in Manatee County.
Below is a summary of the 2007 rate plan for Citizens customers, including a January increase that has been approved by state regulators and the recommended March increase that is under fire and subject to review Thursday by the Citizens board. This breakdown, provided by Citizens, begins with the biggest rate proposals:
Premium increase amounting to more than 760 percent is recommended for 163 commercial policyholders inside the wind pool, beginning in March. The average policy for this group of non-residential customers is now $1,276 annually; it would climb to $11,073 for new and renewal policies.
Premiums for five commercial-residential customers, including residential condominiums, are scheduled to increase in March, but Citizens spokesman Rocky Scott said the amount of the increase is not yet available.
A 104.6 percent increase for 2,757 high-risk homeowners inside the wind pool includes an already approved 31.3 percent increase effective in January, and a proposed March increase of 73.3 percent. A homeowner who has been paying $1,000 for insurance would be increased to $1,313 on the first renewal after January. If the proposed increase for March is approved, the $1,313 policy would increase to $2,275.
There are increases of 8.5 to 26.3 percent for the 15,606 homeowners in the personal-lines category, most of whom are outside the wind pool.
The 26.3 percent increase plan for homeowners qualifying for the wind pool includes an approved rate hike of 16.4 percent effective in January and an additional 9.9 percent recommended rate increase for March. A $1,000 policy would increase to $1,164 in January and then jump to $1,279, if the March proposal is approved.
Homeowners outside the wind pool are not scheduled for a January increase from Citizens. However, the state insuror is recommending that rates for this group go up 8.5 percent in March. If approved, a $1,000 policy would increase to $1,085.