Homeowners prepare for 14% insurance premium hike as insurer tries to stabilize market | Insurance business America
Millions of people could be affected as hurricane season hits the state
Property
By Matthew Sellers
In recent years, Citizens has become the largest property insurer in Florida, accounting for 18% of the market. However, state officials are actively working to transfer policies from Citizens to private insurers to reduce the financial risks associated with major hurricanes. Since October, over 400,000 policies have moved to the private market. “We have seen more than 400,000 citizen insurance policies moved to the private market. Why is this good? First, it eliminates risk for citizens, but second, it shows that the private market is healthier,” explained Mark Friedlander of the Insurance Information Institute.
Friedlander emphasized that this rate increase is critical to improving the competitiveness of Florida’s insurance market. “You purchase insurance at a discounted rate from Citizens. Many people may not think this; they think, ‘I pay so much, what are you talking about?’ But you are buying citizens’ insurance at an artificially low rate.”
West Palm Beach homeowner Laura Bongarzone has felt the impact of rising insurance costs firsthand, telling CBS12 News her premiums, which were $2,800 in 2020, have increased to $5,987 this year.
For homeowners like Bongarzone, the proposed increase presents a challenging scenario. “They are essentially being held hostage. You can go anywhere, no one will take insurance anymore, and if I go somewhere else it will be even more,” she said.
The proposed rate increase, which must be approved by both the Board of Governors and the Office of Insurance Regulation, could take effect on January 1, 2025. This would be the largest average tariff increase and only the second double-digit increase in the history of citizens’ insurance.
“These are very positive signs that we are creating an environment where there is a potentially more stable market and more competition in the state of Florida,” commented Charlie Lydecker, Chairman of Foundation Risk Partners and a member of the Board of Governors.
Citizens Insurance, which covers 1.2 million policies, was originally designed for homeowners unable to obtain insurance on the private market. However, as private insurers canceled their policies and increased rates, Citizens became the cheaper option. “You can’t charge what we call actuarially sound rates. “That means if they were a private insurer, they would have charged much higher rates in recent years just based on market conditions and risk exposure,” Friedlander noted.
Despite the rate increases, the private insurance market recorded lower growth this year, indicating improved health. “The bottom line is that the private insurance market has become much healthier,” Friedlander added. “That’s why they can now adjust their tariffs to a very moderate level.”
However, the strength of new insurers entering the market has been questioned. “[W]“We show that traditional insurers are exiting high-risk areas and new, lower quality insurers are entering and filling the gap,” says a summary of a Harvard/Columbia/Federal Reserve study. “These new insurers serve the riskiest areas, are less diversified, have less capital and 20% of them will default.”
Citizens Insurance expects to attract thousands of new customers during hurricane season, even though depopulation efforts are on hold during this time. “Our real dream is depopulation and lower tax rates,” Lydecker noted.
While the proposed rate increase is less than half of what would be required without a cap, the Board of Governors expects the number of policies could fall below one million. The Florida Office of Insurance Regulation must still approve the increase, with the possibility of sending it back for modification and resubmission.
As the state navigates these changes, homeowners must look for viable insurance options in a fluctuating market landscape.
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2024-06-20 11:52:48
www.insurancebusinessmag.com
