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NU Online News Service, Nov. 11, 3:21 p.m. EST
Representatives from Citizens Property Insurance faced tough questioning from the Florida Office of Insurance Regulation over proposed rate increases for high-risk wind-only coverage, including a 7.5 percent increase for homeowners.
Other increases sought by the state-created insurer of last resort include 11.8 percent for wind damage coverage for mobile homeowners, 5.9 percent for dwelling fire, 9.6 percent for commercial property residential, and 9.9 percent for commercial non-residential.
If approved, or even if adjusted, it would represent the first increase in Citizens rates for these policies since 2006. In May, the Florida legislature passed a bill calling for actuarially sound rates for Citizens and authorizing increases of up to 10 percent per year, per policy.
Regulators pressed the Citizens representatives to justify their numbers, and according to Sam Miller, executive vice president of the Florida Insurance Council, showed the same toughness in questioning Citizens that private carriers face.
“The main thing is the Citizens rate freeze has been lifted,” Mr. Miller said.
Citizens used a public model to determine what rate increases would be actuarially sound, and regulators acknowledged that Citizens was correct in the way it used the model when filing for the increase.
But Steve Parton, general counsel at the OIR, after hearing testimony from interested parties, wondered whether regulators could reject all or part of the model if it was shown to not be accurate.
The issue arose after a group raised concerns with how Monroe County was treated by the model. Mr. Parton told NU Online that the group, Fair Insurance Rates in Monroe (FIRM), made an effective case that the model did not properly consider damage in that area that would be caused by storm surge rather than wind, and also did not account properly for the tougher building codes in Monroe County.
FIRM representatives at the hearing noted that the stricter building codes mean that structures are more expensive to build and to repair, and they contended that insurance rates should at least reflect the improved quality of the structures.
Mr. Parton said FIRM made its case “persuasively,” and he said he took particular interest in a comment from a FIRM representative that it was understood the OIR had to accept the results of the public model. “I don’t know if I agree with that,” Mr. Parton said.
He said it is one of the issues the OIR will look at as it examines Citizens’ filing. Insurers have to use approved models, and Citizens must use the public model, Mr. Parton said. The insurers cannot change the model output, but Mr. Parton wondered how that affects the OIR’s authority to reject all or part of the model when inaccuracies or incorrect parameters are discovered.
John Kuczwanski, public information manager for Citizens, said FIRM expressed concerns with Citizens’ use of private models in 2006, and pushed for the use of the public model, which was used for this filing. “They appear to have concerns over the public model and how that treats Monroe County,” he added.
He said Citizens did as it was told in developing this filing and will now wait to hear from the OIR.