Citizens Property Insurance rates headed up

Florida homeowners with Citizens Insurance are facing a new rate hike. (Sun Sentinel, file)

Homeowners insurance rates for Citizens Property Insurance policyholders will rise by a 6 percent statewide average next year, regulators said Monday night.

The average increase approved for many parts of South Florida next year is nearly 10 percent, on top of average increases of about 10 percent <a href="http://weblogs.sun-sentinel.com/business/realestate/housekeys/blog/2010/09/what_citizens_property_insuran.html"target="new">for most parts of South Florida</a> this year. An individual policyholder's premium can vary from statewide and regional averages.

Regulators approved average decreases for some parts of South Florida.

State-backed Citizens, Florida's largest property insurer, had asked for a statewide increase of 21 percent for homeowners policies, driven largely by triple-digit rate hikes for sinkhole coverage – which is in demand mainly in the western part of Florida.

The 6 percent increase for homeowners policies approved by the Office of Insurance Regulation includes a 39 percent average rate hike for sinkhole coverage and an increase of nearly 9 percent for rental and vacation home policies, including a 97 percent rate hike for sinkhole coverage.

Regulators said sinkhole claims have increased dramatically but Citizens officials didn't justify the need for their proposed increases of 447 percent and 632 percent for sinkhole coverage for homeowners and dwelling-fire policies, respectively, and they should have done a better job of taking into account the impact of a sweeping law passed this year to lower sinkhole claims.

“The Office’s decision is intended to reflect the Legislature’s intention to give Citizens [financially] supportable rates for the sinkhole portion of the premium,” Insurance Commissioner Kevin McCarty said in a statement. “Although more credible data and study is required, these established rates will start Citizens on the path of having a sound rate for their sinkhole risk.”

Citizens collected $32 million in sinkhole premiums in 2010 and

projected paying out $245 million in claims expenses.

Sinkhole coverage does not affect renters, condo unit owners, and homeowners with multi-peril policies who choose not to purchase it.

There are 84,908 policies in South Florida with sinkhole coverage, largely because it costs very little, about $3 to $20 on average. Citizens automatically adds sinkhole coverage to policies except in Pasco and Hernando counties.

State law caps the annual premium increase for Citizens policyholders at 10 percent, but that excludes coverage changes, surcharges and sinkhole coverage.

State law caps the annual premium increase for Citizens policyholders at 10 percent, but that excludes coverage changes, surcharges and sinkhole coverage.

That's why policyholders may see much higher increases if Citizens does a new estimate of their homes' <a href="http://www.sun-sentinel.com/business/fl-citizens-premiums-rise-20110415,0,7081468.story"target="new">rebuilding cost</a>.

Sen. Mike Fasano, R -New Port Richey,wrote Citizens President Scott Wallace last week asking why it increased the rebuilding cost for George Pearson, a policyholder in Holiday, Fla., to about $224,000 even after Pearson hired an appraiser that concluded his home would cost about $128,000 to replace.

At a hearing on Citizens' rates last week, regulators asked Citizens to provide a report of how many policyholders were required in recent years to have more coverage because of new rebuilding cost estimates.

Fasano and another legislator praised McCarty and policyholders who opposed the increase. Policyholders of Florida, a group formed by a Tampa attorney, brought busloads of people donning blue t-shirts to the hearing last week.