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Citizens Property Insurance Corp. will file for a statewide average increase of 8.2 percent for personal lines policyholders – homeowners, condominium owners and renters.

The Florida insurer of last resort’s Board of Governors on Wednesday approved a 2019 rate package that the company says reflects the continued impact of runaway litigation costs that are driving up rates across the state.

“Unfortunately, our customers are paying the price for these exaggerated losses,” said Gary Aubuchon, interim chairman of Citizens Board of Governors. “The unnecessary increase in litigation continues to take a toll.”

Citizens announced Monday that it would ask the board to approve the 2019 recommendations, which take into account policy language changes that became effective on Aug. 1, 2018. It is the third consecutive increase requested by the insurer since 2016, which it claims is related to what has become known as assignment of benefits (AOB) abuse with nonweather water losses – broken pipes, leaky washers, etc.

Citizens has borne the brunt of the abuse since 2013 and the increasing litigation surrounding those nonhurricane related claims, especially in South Florida. Through September 2018, Citizens has received 2,617 AOB-related lawsuits for the year, up from 860 in 2013, and it is on track to surpass a 2016 peak of 3,242.

The insurer said these losses have forced it to dip into surplus for each of the past four years, a trend that is projected to continue in 2019.

Litigation is a key driver behind the need for higher rates, the insurer noted. The state’s one-way attorney fee is also blamed for the increasing abuse.

“Originally created to protect homeowners in legal matters against their insurers, Florida’s well-intentioned one-way attorney fee statute has been expanded by the courts to produce an uneven playing field in disputes between insurance companies and other businesses,” Citizens said in a statement.

Citizens said that despite a policy count reduction of more than 56 percent since 2013, the number of lawsuits filed against Citizens grew from 9,146 in 2013 to 10,357 for the first nine months of 2018. Private insurance companies have seen litigation nearly triple to 53,160 cases during that same period. If litigation were to return to pre-2013 levels, nearly all Citizens multiperil policyholders would see rates decrease, according to the insurer.

For 2019, the recommendation would increase rates for 97 percent of homeowners with multiperil policies. In 2015, Citizens approved rate decreases for 70 percent of its multiperil homeowners policyholders and an overall statewide decrease of 1.8 percent.

Citizens has taken a number of actions to stem the abuse, including the Managed Repair Program. The changes reduced Citizens indicated rate need – the increase necessary for Citizens rates to become actuarially sound – by 19 percent.

The good news, the insurer said, is affordable reinsurance and depopulation efforts over the past several years have reduced Citizens’ policy count from nearly 1.5 million in 2012 to 435,000, a reduction that has helped provide the state-run insurer the ability to pay claims following a 1-100 year storm, with ample reserves to cover a second 1-41 year event.

The rates, if approved by the Florida Office of Insurance Regulation, will be effective for new and renewal policies beginning Sept.1, 2019. Citizens is required by law to recommend actuarially sound rates while complying with a legislative glide path that caps rate increases at 10 percent, excluding coverage changes and surcharges.

A spokesperson from the Florida Office of Insurance Regulation said OIR has not yet received the annual rate filings from Citizens, and upon receipt, it will review the filings in accordance with Florida law and conduct a public hearing.

Webinar: Florida Assignment of Benefits Crisis: Where Does the Industry Go From Here?

Topics Lawsuits Trends Florida Carriers Pricing Trends Homeowners