Citizens Will Have Rate Hikes … but Less Than Other Insurers
Citizens Property Insurance Corporation (Citizens) was created in 2002 from the merger of two other entities to provide both windstorm coverage and general property insurance for homeowners who could not obtain insurance elsewhere. It was established by the Florida Legislature in Chapter 627.351(6) Florida Statutes as a not-for-profit insurer of last resort, headquartered in Tallahassee Florida, and quickly became the largest insurer in the state.
Four of Florida’s largest home insurers have raised rates between 40 and 60 percent in recent years due probably to the hurricane devastation suffered by the state recently.
Although Citizens have also raised rates, those hikes have been the lowest, by far, over the past two years.
Another reason Citizens has grown so quickly is that more and more private insurers have left the state. Citizens has grown from 420,000 accounts in 2019 to 1.3 million today.
Quite honestly, getting and keeping a Citizens policy is a smart financial move. A Sun Sentinel comparison found that Citizens rate increases were among the lowest of Florida’s top ten insurers.
One reason Citizens can offer low rates is that the company doesn’t have to depend on the actual cost of providing insurance when setting rates. Since Citizens is not a public company, there are no shareholders to answer to. There aren’t even owners.
Nevertheless, some lawmakers are growing concerned. As Citizens grows larger, it becomes more vulnerable to one or two massive storms decimating the $4.9 billion surplus that it possesses.
Part of the reason that Citizens rates have remained so low is the 10% annual cap that was imposed by Governor Christ in 2009. But in a vote last year, the state Legislature OK’d a measure that would increase the cap by 1% over five years until 2026, when it would hit 15%.
Even with the proposed increases, the company is averaging 7,100 new policies per week.
Citizens think that will change as customers face a new rule barring them from remaining with Citizens if a private company offers to take them for up to 20% more in premium than they currently pay.
To further lessen the burden on the company, Citizens is now allowed to increase rates charged on vacation and investment homes by 50%.
But again, if rates continue to climb, Citizens might always remain the least expensive insurer in Florida.