Insurance consumer advocate challenging Citizens rate increase request


It’s an age-old thing: Advertisements tell us we’re “saving” if we buy now. But it all depends on whether we really need or want the product. Otherwise, it’s not saving. It’s just spending.

Now turn to property insurance. Take a careful look at the 3.2 percent rate hike requested for 2016 by state-run Citizens Property Insurance Corp., Florida’s new insurance consumer advocate is asking its top regulator in a letter.

“I urge the Office of Insurance Regulation to strongly consider the impact of Citizen’s reinsurance program” as well as debt-financing and water-loss claims affecting rates, Sha’Ron James wrote to insurance commissioner Kevin McCarty this week.

Here’s what is at issue: Citizens says it is spending hundreds of millions of dollars a year on back-up insurance from private offshore companies to save customers from having to pay any assessments after a storm — even a 1-in-100-year storm. This reinsurance costs about 10 percent of each premium dollar, a company spokesman noted. Citizens spent nothing on private reinsurance five years ago.

Citizens officials have trumpeted this as a landmark achievement, representing a potential savings not only to its nearly 600,000 customers, but also customers of other insurers who could be assessed to bail out the state-run company. Private insurers routinely buy reinsurance to this level and beyond, they note.

But from the consumer’s viewpoint, the “savings” only kick in if the reinsurance saves customers from storm taxes after, say, a once-a-century storm — which has a 1 percent of chance of happening in any given year. Otherwise, it’s just spending that goes into the pockets of private reinsurers in Bermuda or Europe, not into the Citizens surplus of more than $7 billion. Money in the surplus can grow in storm-free years and remain available in Florida to pay claims.

Meanwhile, the reinsurance costs are one reason why Citizens says it needs to raise rates an average of 3.2 percent — and 4.6 percent in Palm Beach County — in 2016, though no hurricane has hit in a decade. Citizens reduced overall rates slightly last year, but officials now say reinsurance costs must be spread across a shrinking customer base. They argue other factors such as water-damage claims in South Florida play a much more significant role in rates.

James, the state-paid consumer advocate, agrees getting water claims under control is important, but asks McCarty’s office to take a hard look at whether the Citizens reinsurance program “exceeds the level of adequacy needed to fulfill its obligations.”


Reader Comments ...


Next Up in Nation & World

Transgender woman says CVS pharmacist refused to fill hormone prescriptions
Transgender woman says CVS pharmacist refused to fill hormone prescriptions

A transgender woman in Phoenix has filed a formal complaint against CVS with the Arizona Board of Pharmacy, after she said a pharmacist refused to fill her hormone prescriptions and humiliated her in front of other customers. >> Read more trending news  In a blog on the ACLU of Arizona website, Hilde Hall said it was the first time she filled...
White House figures show Trump on pace to equal Obama deficits
White House figures show Trump on pace to equal Obama deficits

Despite clear signs of expanded economic growth, the latest White House budget estimates predict that President Donald Trump is on the verge of overseeing an expansion of federal deficits which will rival that of President Barack Obama’s two terms in office, as the Trump Administration now forecasts a deficit next year...
911 call released in high school football player's death: ‘I just shot my friend’
911 call released in high school football player's death: ‘I just shot my friend’

Police have released the heartbreaking 911 call a Charlotte teenager made after authorities said he shot and killed his friend, WSOC reports.  “I just, I just shot my friend,” Jermarion Worthy can be heard telling the dispatcher. “Somebody just shot through the house.” “Is anyone injured?” the...
No winner in Friday’s Mega Millions jackpot; prize skyrockets to $493 million
No winner in Friday’s Mega Millions jackpot; prize skyrockets to $493 million

No winners in Friday’s Mega Millions means the jackpot keeps rising -- Tuesday’s drawing has topped $493 million. It’s possible that the prize could surge over the half-billion mark based on ticket sales, lottery officials state. >> Read more trending news  Tuesday’s jackpot of $493 million will be the fifth-largest...
Rapper Offset, of trio Migos, arrested in metro Atlanta on weapon, drug charges
Rapper Offset, of trio Migos, arrested in metro Atlanta on weapon, drug charges

Rapper Offset, of the trio Migos, was arrested Friday on weapon and drug charges in Georgia, WSB reports.  Clayton County police said the rapper, whose real name is Kiari Cephus, and his bodyguard, Senay Gezahgn, were traveling in Jonesboro, just outside Atlanta, when the 2014 Porsche 911 Carrera that Offset was driving was pulled over after...
More Stories