Consumer advocates blasted a proposal that goes before the Citizens Property Insurance Corp. board today to uncap rates for new customers at the state's property insurer of last resort.
The move amounts to an end run around a cap of 10 percent on annual rate increases set by the state legislature and could result in potential triple-digit increases, said Sean Shaw, founder of the advocacy group Policyholders of Florida and the state's former insurance consumer advocate.
Shaw called it "a power grab, legally suspect, and a quick way to stall any hopes for a housing recovery."
The proposed changes are disclosed in agenda materials for today's meeting in Tampa.
"With the 2013 annual rate change, we plan to file an uncapped rate for New Business," Citizens agenda documents show. "Renewal rates will remain subject to the 10 percent glide path."
Shaw said he is not aware of any previous attempt to claim that the cap applies to existing customers but not new ones. Customers are often forced into the state-run carrier because there is no alternative in the private sector, he said.
The move means people such as seniors trying to live on fixed incomes in South Florida could face "astronomical" rates, he said.
Citizens, the state's largest insurer, has 1.4 million customers statewide including 140,000 in Palm Beach County.
Citing concerns about risk exposure, Gov. Rick Scott has urged Citizens to find ways not requiring legislative approval to raise rates, cut back coverage and otherwise push people toward private insurers.
The governor's spokesman did not respond to a request for comment.
Citizens spokeswoman Christine Ashburn explained the reasoning: "The statute states that rates for Citizens should be actuarially sound and then an exception is granted for the 10 percent rate cap for increases to policyholders of the corporation. This exception does not apply to new policyholders; therefore they must be charged an actuarially sound rate."
Proposed increases are subject to approval by the state's Office of Insurance Regulation, she said.
This is not something legislators approved, said Rep. Mark Pafford, D-West Palm Beach.
"The intent is clear with the 10 percent," Pafford said. "So many corporations got breaks when most Floridians didn't. You're going to hit people who can't afford it."
If approved, 14 rate filings will be made throughout August and early September to take effect Jan. 1, 2013, for multi-peril business and Feb. 1, 2013, for wind-only business, Citizens records show.
Sen. Mike Fasano, R-New Port Richey, plans to be at the board meeting in Tampa to speak for ordinary homeowners, legislative aide Greg Giordano said.
One concern: Big increases in insurance rates could disqualify some buyers trying to buy homes in a fragile recovery.
"That is the last thing that needs to be occurring in an economy that is struggling to improve," Giordano said.
Source: The Palm beach Post, "Consumer advocates rail against Citizen's Insurance plan to uncap rates", Charles Elmore, April 26, 2012
Click on this link to learn more.