Citizens signs off on possible rate hikes

By JIM SAUNDERS
THE NEWS SERVICE OF FLORIDA

THE CAPITAL, TALLAHASSEE, June 22, 2016.......... Pointing to a "crisis" in costly water-damage claims, the Citizens Property Insurance Board of Governors on Wednesday unanimously approved a proposed 6.8 percent statewide rate increase.

The proposal would have varying effects for customers of the state-backed insurer, with some homeowners seeing premiums go up more than 6.8 percent and some seeing smaller increases --- or even decreases. State regulators will decide whether to approve the rate changes, which would take effect in early 2017.

Citizens officials primarily blame the higher rates on increases in water-damage claims and a related, politically charged issue known as "assignment of benefits." The issue, which drew heavy attention during this year's legislative session, involves homeowners signing over benefits to contractors, who ultimately pursue payments from insurance companies.

The insurance industry argues that the assignment of benefits process has been abused, particularly with water-damage claims related to issues such as broken pipes. The industry contends that the process has driven up the costs of claims and has spurred a barrage of expensive lawsuits.

"This is a crisis, and it's a crisis not only for Citizens,'' Barry Gilway, president and CEO of Citizens, said during the Board of Governors meeting Wednesday in Maitland. "It's a crisis for the entire industry."

Despite heavy lobbying by the industry, lawmakers this year did not revamp assignment of benefits. Plaintiffs' attorneys and contractors argue, in part, the practice helps homeowners hire contractors quickly to repair damage and also can help force insurers to properly pay claims.

The proposed 6.8 percent statewide rate hike for personal-lines policies, such as homeowners' coverage, would affect customers differently, based on factors including location and types of policies.

For example, rates would go up an average of 6.3 percent for inland homeowners who have multi-peril policies, which include coverage for water damage, according to Citizens. Multi-peril policies for coastal homeowners would see an average increase of 8.6 percent.

Wind-only policies for personal-lines customers also would go up an average of 8.3 percent, under the proposal.

Florida has not been hit by a hurricane in more than a decade, but Citizens Chief Risk Officer John Rollins said the potential increase in wind-only rates stems from the shift of a large number of coastal properties from Citizens to private insurance carriers. He said the remaining Citizens policies provide coverage for properties that historically have not had "adequate" rates to reflect their risks.

But while higher rates for wind-only coverage are an issue for many homeowners in coastal areas, the major debate in the property-insurance industry focuses on water-damage claims. Citizens and other insurers are signaling they will try again next year to get the Legislature to change laws dealing with assignment of benefits.

"We have been warning about premium increases resulting from AOB (assignment of benefits) abuse for four years and, now, because of lawmakers' inaction, consumers are paying the price,'' said Michael Carlson, president of the Personal Insurance Federation of Florida, which includes Allstate, Progressive and State Farm insurance companies.