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Florida homeowners who can’t find coverage from standard insurers turn to Citizens Property Insurance Corp. for affordable home insurance. Florida’s state-created home insurer of last resort currently covers more than 1.4 million properties — making it the largest home insurer in the state by far.
Citizens, however, isn’t meant to be a long-term insurer for Floridians.
Through its depopulation program, Citizens aims to help transfer its policyholders to private insurers. Starting at the end of hurricane season every year and continuing until early spring, Citizens sends thousands of letters to policyholders detailing offers from private insurers approved to take over their policies.
But homeowners have accepted less than half those offers, Kyle Ulrich, president and CEO of the Florida Association of Insurance Agents, recently told P&C Specialist. Many of the premium offers are just too high for homeowners.
The painful Florida home insurance market
Florida is a tough place to find affordable homeowners insurance. High risks for weather damage, high property values, rising materials and labor costs, and a high number of lawsuits have pushed Florida’s average annual home insurance premium close to $8,000, according to Insurify data.
The dwindling number of private insurers in the state is adding to the problem.
Since January 2023, multiple insurance companies have filed for bankruptcy in Florida, culled thousands of high-risk properties from their books of business, or withdrawn from the state altogether. Most recently, Progressive announced it won’t renew about 100,000 homeowner and landlord policies in the state.
Citizens Property Insurance depop program
The challenges of Florida’s difficult home insurance market, including more frequent and costly claims, have affected Citizens as well as private insurers.
Although the not-for-profit ended 2022 in the black, the difference between its assets and liabilities (total net position) decreased by more than $3.2 million, according to an independent auditor’s report. The organization realized an operating loss of $2,447,949 in 2022 — an increase of $2,280,088 over 2021, the report states.
Every policy an insurance company underwrites represents a financial risk. As the largest home insurer in Florida, and facing increasing losses, Citizens’ exposure is significant. Its depopulation program benefits homeowners by getting them back into the standard insurance market. And it benefits Citizens by helping reduce the not-for-profit’s risk exposure.
Frustrating ‘offers’ from private insurers
If a private insurer’s offer through the depopulation program is no more than 20% higher than what a policyholder pays with Citizens, the homeowner must accept the offer. If the homeowner doesn’t act on the acceptable offer, Citizens will assign their policy to the private insurer that has the lowest estimated premium. This rule also applies to Citizens’ policies at the time of renewal.
Ulrich told P&C Specialist that some recent private insurer offers to homeowners have been three or four times higher than their premiums with Citizens. While some insurers are only making offers to policyholders if their private premium meets the 20% guideline, others are making offers even when the price difference is substantially more, he said.
What’s next
Florida home insurance rates are the highest in the nation, averaging $7,788 per year, according to Insurify data. And three of the 10 costliest cities for home insurance are in Florida, including Hallandale Beach, where annual premiums average $12,578.
Still, with Florida insurance companies facing two consecutive years of losses that top $1 billion, rate increases are on the way. The state’s Office of Insurance Regulation has received more than 300 rate action requests since Jan. 1, has approved 157, and rejected only four, according to OIR data.
Citizens Property Insurance Corporation is among the insurers that have requested — and been approved for — rate increases. And while state law caps the amount private insurers can increase rates for primary residences at 12%, Citizens is now allowed to increase premiums on certain homes by a much higher percentage.
As of Nov. 1, 2023, Florida House Bill 799 allows Citizens to levy rate increases of up to 50% on new policies it issues to two groups: homeowners who were previously covered by a now-bankrupt private company and property owners insuring a non-primary residence through Citizens.
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