Property Insurance Rates Explode Despite Lack Of Storms

By  //  January 2, 2013

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Citizens Policy Holders Face 10.8 Percent Hike

BREVARD COUNTY, FLORIDA – Some Brevard County homeowners are not anticipating a happy new year knowing that homeowner’s insurance rates in the state are going up. 

Even without major hurricane damage in 2012, property insurance rates in Florida are facing a steep hike entering 2013. (Shutterstock image)

Homeowners who fled to Citizens Property Insurance Corporation as a last resort are assured of paying more for their policies in 2013 after state insurance regulators last fall approved a 10.8 percent rate increase on policies renewed in the new year.

Florida Insurance Commissioner Kevin McCarty called the increases part of a move to “actuarially supported rates.”

State Farm Insurance, the third largest homeowner in the state, also will be charging an approved 6.9 percent more for homeowner renewals.

State Farm policies in the state total about a third of Citizens’ 1.4 million policies in Florida even though State Farm stopped selling new policies in Florida several years ago and has canceled 125,000 policies, according to the industry site WebWire.

State Farm reportedly will focus on residential rental policies in the future. To ensure profitability in that product line, regulators also approved a 6 percent rate increase in home rental policies. Citizens’ was given approval to boost rates for owners of residential property that is rented, with the rate to increase 8.8 percent on average.

Citizens Property Insurance was created in 2002 to provide property insurance for Florida homeowners who could not obtain polices elsewhere. It is the largest insurer in the state. (Image courtesy of Citizens Property Insurance Corporation)

So the trend is clear and the forces behind it are painfully well known.

A series of hurricanes in recent years left insurance providers in perilous condition.

Citizens stepped up in its “last resort” role and took on many higher risk homeowners who were unable to keep or buy a policy with an insurance provider in the commercial market.

Legislators now are trying to mitigate risk for Citizens by forcing the corporation to send some of its policyholders back into the open market.

The corporation is loaning private insurers $350 million to encourage them to take on as many as 300,000 of Citizens’ policyholders. The hope is that reducing Citizens’ risk will reduce the chances of “hurricane taxes” being levied in the future.

Much of the insurance payout risk is centered on south Florida, which is most vulnerable to hurricanes.

Consequently, much of Citizens’ port folio is comprised of south Florida properties, which places it in particular jeopardy. Legislators from other parts of Florida might not care so much about that, but they know general “hurricane taxes” would hit their constituents, too.

What can homeowners do about this as the new year begins? If they have insurance from a commercial provider, they can only wait and see what happens to their rates. If they are a Citizens’ customer about to be divested, they can begin to compare policy features and rates offered by the companies taking on new policies.

Neither prospect is an especially happy one.