Homeowners in the Florida Keys say they’re tired of Citizens Property Insurance Corp. increasing their costs for hurricane insurance by nearly 10 percent each year since 2010.
On Thursday, a grass-roots homeowner organization asked the state Office of Insurance Regulation to put rate increases in Monroe County on hold for up to three years. They want experts to figure out whether Citizens should start basing its rates on a loss-projection computer model that recently started predicting lower windstorm damage costs there.
“These rates have brought us to the point of economic crisis,” said Mel Montagne, president of Keys advocacy group Fair Insurance Rates in Monroe, or FIRM.
Montagne, who works as an insurance agent in the Keys, and fellow FIRM member Joel Walsh addressed state regulators during a public hearing Thursday over proposed 2017 rates for customers of Citizens, the state-run “insurer of last resort.”
Citizens is seeking rate increases averaging 6.8 percent statewide despite a decade-long absence of hurricanes. Much of that increase is blamed on increased claims costs associated with non-weather-related water losses and use of assignment of benefits by water-damage repair contractors, primarily in Broward, Palm Beach and Miami-Dade counties, where Citizens is seeking average hikes of 8.9 percent to 9.1 percent for multiperil policies.
But non-weather-related losses don’t affect rates for wind-only policies, which cover only damage from major hurricane events and are priced separately from “all other perils” policies that cover fire, theft, appliance malfunctions and personal liability, among other losses.
Citizens is seeking rate increases averaging 8.9 percent for 18,467 policies in Monroe County, including 16,993 wind-only policies. Because of the Keys’ vulnerability to hurricanes, Citizens is the only insurance choice for most homeowners there.
Hurricane coverage, required for anyone with a mortgage loan, makes insurance expensive in the Keys for “people who work for a living,” Walsh said.
FIRM’s 5,000 members include a Marathon couple whose insurance costs spiked from $2,400 in 2010 to $4,800 in 2016; a Key West condo owner whose assessments blew up from $6,900 to $14,000 over the past year; and a 40-year Monroe County resident “who needs to keep working at age 70 in order to pay windstorm rates.”
It’s not right, Walsh said. “Monroe County, Florida, has paid more in insurance premiums than it has had in claims every year that Citizens has been in existence,” including 2005, when four storms impacted Monroe.
But Citizens officials say wind-only policies have always cost less under Citizens than they otherwise would on the private market because state law restricts rate increases of more than 10 percent each year as policy costs are moved to a fair reflection of risk known as “actuarial soundness.”
John Rollins, Citizens’ chief risk officer, said the company has long based rates on “a consensus” of four loss projection models approved for insurance companies’ use by the Florida Commission on Hurricane Loss Projection Methodology, created by the state legislature in 1995.
For years, the four models spit out similar results, he said. But recently one of the models began to conclude that newer homes along the South Florida coastline — and all Keys communities are near the coastline — would sustain less-expensive damage than predicted by the other models, Rollins acknowledged.
Noting that the rogue model calls for windstorm rate decreases in Monroe while the others call for increases, FIRM asked state regulators for a two- to three-year moratorium on rate changes in Monroe so the issue can be studied by the loss-projection commission, scheduled to convene this fall.
Rollins said he welcomes a study of risks unique to the Keys. But Citizens doesn’t favor adopting the rogue model to benefit Monroe customers because that same model also predicts more expensive damage to homes five miles inland. So a move to the less-expensive model for Monroe County would penalize inland residents of Miami-Dade, Rollins said.