Some Florida residents who are policyholders of Citizens Insurance are receiving offers of lower rates from private insurers. This is part of the state’s effort to reduce the number of customers for the state-backed insurer of last resort. However, these lower rates may not be sustainable and could increase significantly at the time of renewal.
Why are some residents getting lower rates?
Citizens Insurance is a non-profit, tax-exempt government entity that provides property insurance to Floridians who cannot find coverage in the private market. It was created in 2002 after several private insurers left the state following major hurricanes. Citizens Insurance has about 600,000 policyholders, mostly in coastal areas that are prone to windstorm damage.
The state has been trying to reduce the number of policyholders of Citizens Insurance by encouraging private insurers to take over some of its policies. This is known as the depopulation program, which aims to reduce the financial risk for the state and taxpayers in case of a catastrophic event. Private insurers can select policies from Citizens Insurance that they are willing to assume and offer lower rates to entice customers to switch.
What is the catch with the lower rates?
While some customers may be tempted by the lower rates offered by private insurers, there is a catch. The lower rates may not reflect the true cost of insuring high-risk properties in Florida, where hurricanes, floods, sinkholes, and lawsuits are common. Private insurers may be offering lower rates initially to attract customers, but they may raise them later to cover their losses or expenses.
Robert Norberg, an insurance agent in Lantana, said that he has seen some offers from private insurers that are much lower than what Citizens Insurance charges. However, he warned that these offers may not last long and could increase significantly at the time of renewal.
“A lot of them are saying, ‘Hey here’s our rate today. This is what we’re offering,’” Norberg said, “but, by the time they get to that renewal, they may have gotten a new rate increase or two rate increases in this marketplace, and that consumer then is hit with that new now rate.”
Norberg said that he has seen some customers who switched to private insurers and then came back to Citizens Insurance after their rates went up. He said that customers should compare the coverage and benefits of different policies before making a decision.
Are there any benefits to switching to private insurers?
Some customers may still benefit from switching to private insurers, depending on their situation and preferences. Private insurers may offer more options and flexibility than Citizens Insurance, such as higher coverage limits, lower deductibles, or additional features. Private insurers may also have better customer service and claim handling than Citizens Insurance, which has been criticized for its delays and denials.
Additionally, some customers may want to switch to private insurers to avoid paying a potential assessment from Citizens Insurance in case of a major disaster. Citizens Insurance has the authority to levy an assessment on all property insurance policyholders in Florida if its surplus is insufficient to pay claims. This means that even customers who are not insured by Citizens Insurance could end up paying for its losses.
What is the outlook for insurance rates in Florida?
The outlook for insurance rates in Florida is uncertain and depends on several factors, such as weather patterns, regulatory changes, market conditions, and consumer behavior. Florida has been experiencing more frequent and intense hurricanes in recent years, which have caused billions of dollars in damages and claims. Florida also has a high rate of litigation and fraud involving property insurance claims, which drives up costs for insurers and consumers.
The state government has been trying to address some of these issues by passing reforms and incentives to stabilize the insurance market and lower rates. For example, the state recently enacted a law that limits attorney fees and restricts roof damage claims. The state also approved six new insurance companies to enter the market and compete with existing ones.
However, these measures may take time to have an effect and may not be enough to offset the rising costs and risks of insuring properties in Florida. Some experts predict that insurance rates will continue to increase in the near future, especially for customers in high-risk areas.