Florida homeowners are accustomed to facing high insurance rates. The state’s yearly average rate of $11,759 is the highest in the country. If the largest insurer in the state gets approval for a significant rate hike, that average could climb even higher.
Citizens Property Insurance Corporation, the state’s insurer of last resort, insures over 1.2 million Florida homes, making it the largest insurer in the state. The proposed rate hike, approved by Citizens’ Board of Governors and announced on June 19, could result in higher home insurance costs for all policyholders.
Rate hikes across the board
Citizen’s Board of Governors unanimously backed a proposal that could lead to double-digit rate increases for policyholders. The proposal now requires approval from the Florida Office of Insurance Regulation. Insurance companies in Florida cannot raise rates without regulatory approval.
The proposal aims to raise rates for multi-peril policies by 13.5%. Multi-peril policies are the most commonly purchased policies, according to the company.
However, the proposed hike affects not only multi-peril policyholders. Condo owners, mobile home owners, single-family homeowners, and renters could see an average rate hike of 14%.
If approved, these rate hikes would be the largest in Citizens’ history and only the second instance of a double-digit increase by Citizens.
Citizens claims that the rate increases are less than half of what is actually required, but state law limits the amount by which rates can be raised. The state’s Office of Insurance Regulation caps all requested rate hikes at 14% for primary homes and 50% for secondary homes.
“Thirty-eight percent is the actual data,” said Mark Friedlander, director of corporate communications for the Insurance Information Institute, to Tampa Bay’s Fox 13. “That’s what they would charge if they were a private market.”
If approved, the rate increases will apply to all new policies and policy renewals effective January 1, 2025.
Why the increase?
Officials from Citizens state that the Florida insurance market is improving and the rate hikes are an effort to align Citizens’ premiums more closely with the general market. The goal is for significant rate hikes to encourage policyholders to seek coverage from private insurers, potentially freeing Citizens to assess both current and non-policyholders after a major weather event.
The state government has been working to transfer policies from Citizens to protect itself in the event of a major storm. The state’s “depopulation” initiative has moved over 200,000 policies from Citizens to the private market, reducing the carrier’s holdings from its peak of 1.4 million policies in the fall of 2023.
However, the depopulation effort may slow down in the coming months if private insurers hesitate to take on too many new policies during hurricane season.
Industry experts anticipate that Citizens will acquire thousands of new customers each week during this time.
The insurer of last resort becomes mainstream
Citizens was never intended to be the largest insurer in Florida. As an insurer of last resort, Citizens provides coverage for homeowners who cannot obtain insurance elsewhere.
However, widespread insurance fraud and costly natural disasters have diminished Florida’s home insurance market, leading to the insolvency of several Florida insurers.
Since 2017, Florida has lost 11 insurers to liquidation and five since 2022.
As other insurers disappeared and some voluntarily exited the market, more people turned to Citizens for coverage.
What’s next? Office of Insurance Regulation to review
Now that Citizens’ Board of Governors has approved the proposal, the proposed rate hike will be reviewed by the Florida Office of Insurance Regulation. The office can approve the rate hike or send it back to the board for revisions.
If the Office of Insurance Regulation sends it back, the board will have to adjust the proposal and resubmit it.
