The board of state-run Citizens Property Insurance Corp. voted Tuesday to raise homeowner premiums 6.7 percent statewide for 2018 — and 9.3 percent in Palm Beach County — and make sweeping changes in the way it handles water claims, drawing fire from contractors who say the moves go too far.
Homeowners would face a $10,000 limit on payments for claims such as a plumbing leak from the state’s second biggest property insurer unless they use company-approved contractors in a managed-repair plan. The proposals are subject to approval by state regulators.
Citizens president Barry Gilway called the plans “stopgap measures” in the wake of repeated failures to get state legislators to change laws that insurers say allow contractors and attorneys to inflate the cost of claims. He told board members meeting in Maitland the problem “truly is getting worse.
A contractor who has spoken out in meetings around the state questioned how it’s a fair choice for consumers, who have little way to know when water is rushing out of a failed pipe whether damage will be limited conveniently to $10,000.
“This is a huge problem and is more of the continued effort to have Citizens and the other carriers control the whole restoration process and not allow the free market and the policyholder to make choices,” said David J DeBlander, president of Pro Clean Restoration and Cleaning in Pensacola. “There is a reason they cannot push their efforts through the legislature these last six to seven years. The people and the legislators can see the carriers are trying to control everything for their best interests and profit margins.”
DeBlander said he has won awards for ethical service from local business groups, but maintained firms like his are often shut out of company managed-repair plans because his loyalty is to the consumer, not the insurer.
“The homeowner deserves to use the vendor of their choice,” DeBlander said. “I currently have a case against them where, after not paying us for 10 months, they had an attorney call me to tell me they would give my company $3,800 for a job we legitimately billed them for $6.500. They didn’t even have an adjuster call us to try to negotiate a deal, only an attorney who said take it or leave it.”
A Citizens spokesman declined comment on that case, but company officials at Tuesday’s meeting said water claims are a big reason why it needs to raise rates.
“It’s ironic that our rates for wind coverage are coming down, but Citizens policyholders in South Florida still must brace themselves for continued rate increases,” board chairman Chris Gardner said. “We don’t want to raise premiums, but Citizens is obligated by statute to set actuarially sound rates.”
The average premium for an H03 policy, covering a single-family home, would rise to $2,877 from $2,631 in Palm Beach County, according to proposals approved by the board. Statewide, it would jump to $2,681 from $2,512.
Such premiums would rise 2.2 percent in Martin, 8.9 percent in St. Lucie and more than 10 percent in Broward and Miami-Dade counties, the most allowed in a single year for Citizens under a state rate cap.
The average state increase for all Citizens residential policies including condos and renters would be 5.3 percent.
Wind-only policies that cover storm winds, and not fire, water claims and other hazards, would rise less, 1.2 percent statewide and 2.6 percent in Palm Beach County to an average of $2,964.
If approved by regulators, rates would take effect Feb. 1, 2018.
“The peril of water continues to be the primary driver of Citizens’ increased rate need,” a company proposal said. “In particular, litigated water claims in South East Florida (Miami-Dade, Broward, and Palm Beach counties) are driving the water indication.”
Citizens also proposes to refuse coverage for more than one water claim in three years or two in five years. Currently, homeowners must have fewer than three “non-Act of God” losses in three years.
In other cases, Citizens moved to ease some restrictions, such as no longer requiring additional inspections for homes more than 50 years old.
The company’s rates have been complicated by a rapid downsizing from 1.5 million customers in 2012 to less than 500,000 now, though transfers to private insurers have significantly slowed and the company expects to add customers in 2017.
In 2016, Citizens posted its first loss since 2005, $27.1 million, after it paid more than six times that amount to private offshore firms for optional reinsurance coverage that covered no claims in a hurricane year, The Palm Beach Post reported.