Citizens Insurance rate hike will be higher than first proposed
Citizens Property Insurance Corp. customers. will receive a larger rate increase than initially proposed, as a result of an amendment to a state law that was partially blocked by a federal judge.
Citizenship officials expressed disappointment in the July 11 ruling, in which U.S. district chief judge Mark Walker ruled that the new law, passed by lawmakers this spring, violated roofers’ rights to speak.
But Citizens’ board of directors took advantage of another part of the measure (SB 76) to approve new rate changes at a meeting on July 14.
“These necessary adjustments reflect the efforts of the Florida legislature to return Citizens to their role as a residual insurance company,” Citizens chairman Carlos Beruff said in a press release. “Unfortunately, we have become the first choice, or only choice, in too many regions of the state.”
Since October 2019, Citizens has seen the number of policies rise from 420,000 to over 640,000 and is now seeing an increase of over 5,000 new policies per week. At this rate, company officials expect the number of policies to exceed 750,000 by the end of 2021, the company reports on its website.
Described as a change from increases previously approved in February, the changes mean that the average rate increase for new and renewing policies after August 1, will be 5.2%, while renewals after February 1 will increase by 7.6%.
The increases vary by location and must still be approved by the Insurance Board.
The new statute, which came into effect on July 1, partially amended a 2011 law that capped annual increases for Citizens customers to 10%, meaning many have not paid actuarially correct rates.
The law, signed last month by Gov. Ron DeSantis, also allows citizens to factor in additional reinsurance cost estimates when calculating rates.
Gale Force Roofing & Restoration LLC of Brandon filed a lawsuit last month against the new statute, arguing that a provision prohibiting roofers from advertising is unconstitutional.
Walker sided with the roofing company and issued a preliminary injunction blocking enforcement of parts of the law. The judge ruled that the new law violates the rights of the First Amendment by directly punishing protected speech.
Walker’s ruling targeted a section of the law that prevents contractors from soliciting homeowners to file insurance claims through a “banned ad,” including things like emails, door hangers, flyers and pamphlets.
“It is also clear that Plaintiff’s impending injuries from prohibiting Plaintiff’s truthful commercial speech outweigh the State’s interest in preventing fraud, protecting consumers from exploitation and stabilizing the insurance market,” it wrote. Walker in the statement.
Lawmakers approved the insurance measure on April 30, amid rising property insurance rates and insurers dropping policies in Florida.
Citizens President and CEO Barry Gilway said he was “not surprised, but disappointed” with Walker’s ruling.
“I understand the logic behind the order,” Gilway said. “But the bottom line is that, in my view, the hiring rate is significantly driven by the recruitment and aggressive solicitation of claims.”
The new law also takes steps to limit attorney fees and shorten the time to file claims.
The statute is seen as a second recent legislative victory for citizens and the insurance industry.
In 2019, lawmakers imposed restrictions on policyholders from transferring claims — known as an allocation of benefits — to contractors, who then pursue payment from insurers. Still, rates are going up and policies are accelerating from private hands to state-backed citizens.
This year’s law raises the 10% cap on annual premium increases by 1% per year over the next five years to make state-backed insurer rates more competitive with private insurance coverage.
The law also requires citizens to factor into their rates the reinsurance costs necessary to protect the surplus against a 1 in 100 year storm and send policyholders to private insurance companies as a private policy premium within 20% of a comparable citizen policy premium. lies .
Citizenship officials noted that state lawmakers could discuss Walker’s ruling during the 2022 legislative session starting in January.
However, they acknowledged that any positive signs that other parts of the law are working as intended will not be noticeable until later in 2022.
“I know we’ll have data, hopefully in the next year or so, to really understand the impact of that on the incoming barrage of lawsuits that we’re seeing,” said Christine Ashburn, head of communications, law and external affairs. of the citizen.
In the lawsuit, Gale Force Roofing and Restoration said it is advertising homeowners to contact the company for storm damage roof inspections.
“Plaintiff (Gale Force Roofing and Restoration) will then truthfully convey the nature and extent of the damage to homeowners,” the lawsuit said. Plaintiff will then encourage homeowners to contact their insurance company to make a claim under their home insurance policy and perform a contract with the claimant to provide the claimant with the benefits available under the homeowner’s insurance policy. to point.”
Gale Force argued that the law cools his First Amendment rights because it forces the company to stop its written advertisements encouraging consumers to contact the company for the purpose of making an insurance claim for roof damage.
The company also argued that the new law is more about reducing insurance claims than preventing fraud, saying the statute serves as a “thinly veiled effort” to prevent homeowners from getting outside help in filing valid insurance claims. for home repairs.
However, supporters of the bill and insurance industry officials argued that questionable, if not fraudulent, roof damage claims have played a major role in driving up costs.
In court documents, attorneys representing the state disputed that the law’s restrictions violate the rights of the First Amendment, arguing that the “prohibited advertising” provision should be considered a reasonable restriction on commercial expressions to combat exploitation and fraud. consumers.
But Walker disagreed.
While the state has the right to regulate contractors and protect Floridians from fraud, Walker wrote in the injunction, “it must do so within the limits set by the Constitution.”
“Here, the legislature has not done so accordingly,” the judge added.