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Citizens Property Insurance Board Approves Rate Changes

Florida’s largest property insurer on Wednesday approved a 10 percent rate hike for many of its nearly 1 million customers, while at the same time also approving up to a 10 percent rate decrease for other eligible customers.

Citizens Property Insurance Corp. had frozen its rates for three years but state lawmakers this past session agreed to end the freeze in 2010 as part of an effort to bolster the finances of the state-created company.

The vote to raise some premiums, however, followed a contentious discussion over whether thousands of customers should get a decrease if computer models showed they were eligible.

Most customers, who largely reside in South Florida, are in line to get rate hikes early next year. But those living in other parts of the state, such as Sarasota, Duval, Santa Rosa and Escambia counties, are eligible for actual decreases.

Some members of the Citizens board, however, said no one should get a rate decrease at a time when Citizens is collecting $1.8 billion less than it needs to be financially sound. They warned that all insurance customers throughout the state will get hit with surcharges if Citizens can’t pay its claims in the event of a major hurricane.

Board members also debated what lawmakers intended because the law ending the freeze capped rate hikes at 10 percent, but was silent on whether rate decreases should be allowed.

State law also says that Citizens is supposed to charge rates that “actuarially sound.”

“The Legislature has given us a mandate to do something and made it impossible for us to do it,’’ said Allan Katz, a Citizens board member and a Tallahassee city commissioner.

But Chairman James Malone said Citizens had to allow decreases because the Office of Insurance Regulation had already warned that Citizens would be breaking the law if did not grant decreases for eligible customers. Unlike private carriers, Citizens cannot appeal or challenge in court any rate decisions made by state regulators.

“The OIR’s view of this is fiscally irresponsible,’’ said Malone. “It may be politically convenient or political expedient…it’s the not the right thing for Citizens.”

Malone warned that Citizens will still get criticized if it can’t pay off claims in a timely fashion: “If we are so unfortunate to have a Cat 4 (hurricane) hit Southeast Florida, everybody in the world is going to be wondering why we didn’t have the resources.”

Carlos Lacasa, a former Miami legislator who now sits on the Citizens board, disagreed. He said that Citizens may never get on firm financial footing and that it was reasonable to permit some customers to receive a decrease. He noted that allowing a 10 percent decrease would cost Citizens $29 million in premium and the other rate hikes would generate $140 million in the coming year.

“It’s not just a question of fairness, it’s a question of community reasonableness and maintaining good will,’’ said Lacasa.

The actual vote to approve the rate hikes – and up to a 10 percent decrease – was split 5-3.

Citizens board members also on Wednesday discussed whether or not the veto of HB 1171 – and the expected pullout of State Farm Florida – will have an impact on its operations. The legislation would have allowed well-capitalized companies such as State Farm to raise rates without approval of state regulators.

Scott Wallace, president and executive director of Citizens, said it was still too early to gauge what impact State Farm would have on the carrier. Citizens officials, however, did note that private Florida-based companies were no longer aggressively moving to “depopulate” Citizens because they were awaiting the outcome of State Farm’s pullout. State Farm and OIR are currently battling over how that pullout will work.

Belinda Miller, deputy insurance commissioner, told Citizens that OIR still planned to insist that State Farm customers not be dumped into Citizens.

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