Florida Last-Resort Insurer Reassessing Replacement Values

 

Thursday, Mar 26,2009, 1:55:02 PM   Click:

Efforts by Florida's state-run insurer to bring premiums up to a level equal to the risk it insures is no way an attempt to circumvent a rate freeze that has been imposed upon the insurer for several years, said a Citizens spokesman.

John Kuczwanski, spokesman for the Citizens Property Insurance Corp., said recent inspections on homes insured by Citizens' wind-only policies are being done to more accurately reflect replacement costs. They are simply an attempt at "collecting appropriate premiums on the risk we actually write," he said.

"If we do not do this, our surplus is not growing, and that puts the rest of us on the hook to pay more in potential assessments," Kuczwanski said. Assessments can be levied against insurers when money is needed to pay claims following a storm.

Kuczwanski said some homeowners might initially be surprised by increases in premiums but the measure is needed to make Citizens -- which had grown to become the largest insurer in the Sunshine State -- better prepared to handle a hurricane by bringing policies' replacement costs up to date.

In August 2008, Citizens said about 350,000 wind-only policyholders would have to reapply for coverage as the insurer implemented a new computer system for writing policies. Kuczwanski said homeowners are able to dispute the new findings and submit a private appraisal from an approved company.

It appears a majority of Florida officials will be in favor of allowing the two-year rate freeze on Citizens Property Insurance Corp. to expire and a transition plan will be put in place to gradually increase rates.

State officials are looking into lifting the freeze, as was recommended by the Citizens Property Insurance Corp. Mission Review Task Force, formed last year by the legislature to examine the state-run insurer. The task force called for a Citizens average statewide increase of up to 10% a year beginning in January 2010 in order to properly re-establish Citizens as the last-resort insurer. The suggestions also include that rates be increased no more than 15% in any one territory and no more than 20% for any one policy (BestWire, Jan. 23, 2009).

Other recommendations included measures to make it more difficult for homeowners to qualify for and remain with Citizens. Currently, Floridians can turn to Citizens if rate quotes they are getting in the private market are 15% higher than rates from Citizens ? a measure started in 2007 that the task force chose to keep. The task force recommended fines and penalties for agents and/or policyholders who do not attempt to re-enter the private market each year, and a certification form must be signed if and when they fail to do so.

In 2007, the top five writers of homeowners multiperil in Florida, according to A.M. Best Co. state/line product information based on direct premiums written, were: State Farm Group, with a 21.3% market share; Citizens Property Insurance Corp., with 20.5%; Universal P&C Insurance Co., with 6.1%; USAA Group, with 5.2%; and Tower Hill Group, with 4.4%.