Florida state-run insurer Citizens backed off proposals to uncap rates for new customers and limit coverage for water damage but its board voted Friday to approve an average 10.2 percent increase in premiums.
In an unusual move, the board approved sending regulators two sets of rates. One is an average 8.8 percent increase statewide. But the board later narrowly voted to recommend a second set of rates reflecting risk factors that amounted to a 10.2 percent increase.
The rate filings would take effect in 2013 and are subject to approval by the state's Office of Insurance Regulation. Citizens, the state's largest property insurer, has 1.4 million customers statewide and 140,000 in Palm Beach County/
State law caps Citizens rate increases at 10 percent a year.
"They approved a 10.2 average increase because they are filing rates both with and without the risk load factor," company spokeswoman Christine Turner Ashburn said. "The vote included a preference toward the risk load factor which was the 10.2 although both that and the 8.8 are being filed."
The 10.2 percent does not violate the rate cap because it includes a state catastrophe fund cash build-up Citizens is allowed to pass through, she said.
Board member John Rollins said the risk factors in the second proposal would better reflect the potential cost of paying off claims from a severe storm.
The financial health of Citizens has been a topic of contentious debate. Gov. Rick Scott and others have warned of the risk of assessments to all home and car insurance customers if, say, a once-in-100-year storm hit the state. But records show Citizens could handle a repeat of the multi-storm 2004 season, or Hurricane Wilma in 2005, for example, from its nearly $6 billion in cash on hand. And with nearly $20 billion in total claims-paying resources, no emergency assessments would be required even if a storm as intense as 1992's Hurricane Andrew were to return, though some so-called "regular" assessments would apply, officials said.
The board voted to study further a plan to limit to $15,000 coverage for certain kinds of water damages such as plumbing leaks.
One insurance adjuster called the water-damage limit arbitrary and "just not fair" during public discussion at the board meeting in Miami.
Rollins said the prospect of having to pay less for such water claims would help overall rates stay lower. Citizens staff had estimated a 7 percent overall rate increase with the water limits.
Rollins said he would "forego and stand down" on a plan to uncap rates for new customers. Uncapping rates for new customers could have raised rates more than 50 percent in parts of Palm Beach County. An advisory from the state's Chief Financial Officer and former state Senate president Jeff Atwater said legislators intended a 10 percent cap on rate increases to apply to both new and existing customers.
But the board voted 3-2 to send regulators two different sets of rates, ultimately recommending the second one that would call for somewhat higher rates. Chairman Carlos Lacasa said he was not in favor of recommending one set of rates over the other and voted against the measure. Rollins said one goal is to help "depopulate" Citizens, meaning push customers to private carriers, in regions such as southeast Florida.
Three private insurers seek rate increases with hearings in coming weeks: Allstate's Castle Key subsidiaries want 21.9 percent and 32.7 percent statewide average hikes, Universal Insurance wants 22 percent and State Farm Florida wants 14.9 percent. State regulators on Wednesday held a hearing on State Farm's proposed 58 percent increase for those who rent their homes.
Citizens is under pressure to make sure its rates aren't dramatically cheaper than private insurers', executives said.
"If (others' rate increases) are approved, the gap between Citizens and the marketplace will widen," Citizens president Barry Gilway said.