State-owned Citizens Property Insurance Co. is once again seeking to increase annual rates by about 10 percent — the maximum allowable by state law — while blaming “skyrocketing nonweather related water loss claims in South Florida.”
Yet according to Citizens’ own data, nonweather water claims aren’t “skyrocketing,” as asserted in a news release late Tuesday announcing the proposed rate increases, and have actually been in decline since 2015.
If approved by the company’s Board of Governors on Wednesday and then by the Florida Office of Insurance Regulation this fall, rates for multiperil coverage (wind plus all other risks) would increase in 2019 by 9.9 percent for Broward County’s 27,262 policyholders, 9.8 percent for 54,431 policyholders in Miami-Dade, and 7.7 percent for Palm Beach County’s 10,725 policyholders.
This year, numerous counties beyond the tricounty region would also see steep increases, including Duval (9.3 percent), Sarasota (8.2 percent) and Hillsborough (7.9 percent).
Statewide, Citizens’ rate would increase an average 8.5 percent for 158,825 policyholders with multiperil coverage on their single-family homes.
The company’s 40,172 homeowners with wind-only coverage would see rates increase an average 7.9 percent, including 8.6 percent for 6,910 customers in Broward, 6.1 percent for 8,113 customers in Miami-Dade, and 8.6 percent for 5,101 customers in Palm Beach County.
Seeking the maximum allowable rate hikes for its South Florida customers has become an annual tradition for Citizens. This marks the third year in a row the company has sought rate hikes near 10 percent in South Florida, after its executives failed to persuade state legislators to change state laws that insurers say are allowing repair contractors and plaintiffs’ attorneys to extract too much money in claims disputes.
In a news release on Tuesday, Citizens said its rates would have to nearly triple to cover the full cost of the increased claims and accompanying litigation expenses. However, the company is barred by state law from seeking rate increases averaging more than 10 percent statewide.
Citizens and many private-market insurers have been complaining for six years about increased costs stemming from “assignment of benefits” — when contractors persuade policyholders to sign over rights to collect policy benefits as a condition of repairing damage from broken pipes or appliances. Those contractors then submit inflated invoices and quickly file suit if insurers deny the claim or refuse to pay the full invoice, insurers say. Plaintiffs’ attorneys, they contend, are incentivized by a longstanding state law that enables policyholders or their assignees to sue insurance companies and collect so-called “one-way legal fees” if insurers ultimately lose or agree to pay any amount over their initial settlement offer.
longstanding state law that enables policyholders or their assignees to sue insurance companies and collect so-called “one-way legal fees” if insurers ultimately lose or agree to pay any amount over their initial settlement offer.
Contractors counter that they have no choice but to sue when Citizens and other large insurers underpay their invoices, delay payments for months, and break off communications if they learn the contractor is working under an assignment of benefits.
Citizens has long blamed “assignment of benefits” losses on what it calls claims abuses and excessive litigation by a group of South Florida-based attorneys and contractors.
The company has revised its coverage rules to minimize impacts, including capping coverage for nonweather-related water damage at $10,000 unless customers agree to use a contractor from Citizens’ new “managed repair network.” The change will take effect Aug. 1.
Even with projected savings from that program, Citizens says it still needs the increases in its newest rate request.
Yet Citizens’ claim that higher rates are needed to offset “skyrocketing nonweather related water loss claims in South Florida” — which it says is spreading to other areas of the state — is contradicted by data supplied by the company that indicates the impact of nonweather water claims is actually declining.
The number of nonweather-related water claims received by the company declined from 12,777 in 2015 to 10,510 in 2017 — a 17.7 percent reduction. Meanwhile, the total number of Citizens policies declined from 503,865 at the end of 2015 to 434,919 at the end of 2017 — a 13.7 percent reduction.
While the number of Citizens policies declined by 2.6 percent from the end of 2016 to the end of 2017, the number of new lawsuits stemming from nonweather water claims declined 35.5 percent between the two years, from 5,379 to 3,469.
Although Citizens has stated that Hurricane Irma likely accelerated the decline between September and December of 2017, it was clear by the spring of 2017 that the number of new nonweather water lawsuits filed each month had begun to decline compared with the same months in 2016, the Sun Sentinel reported in February.
Asked what is skyrocketing about nonweather water claims, Christine Ashburn, Citizens’ chief of communications, legislative and external affairs, did not directly respond to the question: “Ninety plus percent of our litigation coming out of the [tricounty region] while only 50 percent of our policy count is in those same counties is a significant concern,” she said by email. “Fifty percent of our claims are now ending up in litigation while prior to 2012 it was closer to 12 percent. Additionally, total loss numbers and claim counts cannot be looked at without considering our reduction in exposure and policy count over time.”
When it was pointed out that the rate of decline in water claims and suits exceeded the decline in Citizens’ overall policies, Ashburn said, “My broad comment would be that while things aren’t getting worse, at the same level, they are most definitely not getting better, and we are seeing litigation rates increase significantly outside of the tricounty area. Maybe that would have been a better statement [in the news release].”
Meanwhile, reactions to Citizens’ proposed rate increases were steeped in disappointment and frustration.
“These proposed rate increases, while troubling, come as no surprise to us and show exactly how [“assignment of benefits” are] hurting Florida’s consumers,’’ said Mark Wilson, president and CEO of the Florida Chamber of Commerce, which for three years has funded a public relations campaign supporting “assignment of benefits” and “one-way legal fee” reform. “Elections matter. We must elect candidates that will stop this fraud and abuse, and keep insurance rates affordable for families.”
Paul Handerhan, vice president for public policy at the Florida Association for Insurance Reform, said, “Unfortunately, once again, Florida’s policyholders are the big losers, left with eroded coverage and higher insurance premiums.”
And Sen. Anitere Flores, the Miami Republican who, as chair of the Senate Banking and Insurance Committee over the past two years, blocked a package of reforms favored by Citizens and other insurers because they would not promise a corresponding rate reduction, said by email:
“Although this does not surprise me, it is absolutely outrageous and unacceptable that Citizens continues to hike rates for policyholders. These rate hikes will negatively impact the growth of our state in regards to home ownership.
“When will these 10 percent yearly hikes end? And how can consumers afford to live in South Florida anymore with these rates? I’ve said it before and I’ll say it again: Citizens has not only undermined a statutory mandate to provide policyholders affordable insurance, it has lost the trust of consumers.