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Homeowners in South Florida, as well as in many other parts of the state, can expect another rate increase next year from the state-run insurer of last resort.

Citizens Board of Governors approved recommended rates and policy changes last month for 2018 that the company said reflect rising nonweather water losses, abuse of a policyholder right referred to as assignment of benefits (AOB) and out-of-control litigation that, left unchecked, will force rate hikes for years to come.

By unanimous vote, board members recommended a 5.3 percent statewide increase for personal lines policyholders – homeowners, condominium unit owners and renters – with most increases concentrated in three South Florida counties where, according to Citizens data, water losses, AOB abuse and litigation are disproportionately severe.

Board members also approved a series of policy changes that the insurer hopes to implement to reduce claims costs for nonweather water losses that it says have been pushing rates higher for South Florida customers over the last few years. If approved by the Florida Office of Insurance Regulation (OIR), the changes would take effect in February 2018.

Among the major policy changes is a $10,000 cap on water loss repairs for customers who decide not to participate in the Citizens Managed Repair Program, which links customers with a network of vetted contractors. The voluntary managed repair program, coupled with a free emergency water removal service, will become available to new Citizens policyholders after July 1, 2017, and for existing customers when their policies renew.

Other policy changes include expanding obligations to third parties that accept an assignment of benefits. Currently, contractors who accept an assignment are not bound by the same obligations, including allowing Citizens adjusters to inspect a claim in a timely manner or providing proof that a loss has occurred.

“These proposed rate increases and product changes are critical for Citizens’ efforts to bring some relief to a market that is being made increasingly expensive by unnecessary litigation and out-of-control water loss claims,” said Chris Gardner, chairman of the Citizens Board of Governors. “Unfortunately, we are making it more expensive for many of our customers to own a home.”

The 2017 legislative session concluded in May without making significant changes to state law regarding assignment of benefits and the “one-way attorney fee” statute that many stakeholders agree are driving up costs that must be paid through higher premiums. Citizens joined other insurers, business and consumer groups pushing for reform.

“It’s ironic that our rates for wind coverage are coming down, but Citizens policyholders in South Florida still must brace themselves for continued rate increases,” Gardner said. “We don’t want to raise premiums, but Citizens is obligated by statute to set actuarially sound rates.”

The 2018 rate proposal continues a recent trend in Miami-Dade, Broward and Palm Beach counties. Homeowners with multiperil coverage in Miami Dade County, for example, will see an average increase of 10.5 percent, or $359, from 2017 premiums. Broward and Palm Beach county homeowners will see rates increase by 10.4 percent and 9.3 percent respectively.

Outside of the Tricounty area, many policyholders will see rates decrease or remain flat. Citizens’ homeowners policyholders in 56 of 67 counties will see average rates decrease under the set of proposed rates.

Proposed rates and policy changes must be approved by OIR, which oversees all Florida property insurers. Both the new rates and policy changes would take effect in February 2018.

“We were hoping for legislative change and a surgical solution,” said Barry Gilway, Citizens president/CEO and executive director. “Given that this did not occur in 2017, we cannot wait for the trends to worsen and take no corrective action.”

The full rate kit can be viewed on Citizens website.

Topics Trends Florida Pricing Trends Homeowners