Only 3 of 10 policies are leaving
As the state-backed Citizens Property Insurance Corporation awaits a formal decision by regulators on its revamped 11.5% homeowners insurance rate hike request, its efforts to shed policies to the private market is succeeding with only three out of 10 policies. There is however, continued welcome news of reduced litigation frequency among key indicators, credited to the Florida Legislature’s marketplace reforms.
Rate Hike: Citizens is expecting formal approval as soon as today of its 11.5% average rate increase on homeowners insurance policies in Florida. The Office of Insurance Regulation last month rejected Citizens previous 12% request as not actuarially-justified for certain regions of the state. When factoring in the other types of personal-lines residential polices, the average increase will be 12.3% statewide compared with the original 13.1% overall increase. Those rate changes will take effect December 16.
Takeouts: As we shared in the last newsletter, industry stakeholders say Citizens needed that 12% increase to qualify enough of its nearly 1.4 million policyholders to move into the private market. A Citizens policyholder receiving a private carrier’s takeout offer that’s within 20% above the cost of the Citizens policy is no longer eligible to renew with Citizens. It’s part of the legislature’s recent market reforms to reduce Citizens policy count toward returning it to the true insurer-of-last- resort and reduce the risk on Florida taxpayers of a Citizens bailout.
Proof is in the chart below of the August takeouts. There was an attempt to remove 28,826 policies, yet just 8,836 were taken (30.6%) – the remainder fell below the 20% pricing rule. Compare that to the average 4,500 new policies Citizens is writing each week. Citizens and the private market will try again next month (October) to takeout up to 184,000 policies and another 202,000 in November.
Source: Citizens Property Insurance Corp.
In my comments to the news media last week, I said that it was a good sign that so many private insurance companies are willing to take on some of Citizens policies and that Citizens own goal is to reduce its policy count to only those customers who truly cannot find private insurance company. Even with an expected 11.5% rate increase, Citizens will remain unfairly competitive with the private insurance market – something the legislative reforms were designed to fix.
Litigation Down: To be sure, some market reforms are working, especially those meant to reign-in out of control insurance litigation. Citizens reports its number of new lawsuits is down 20% year over year from 2022. Assignment of Benefits (AOB) lawsuits have decreased by 33%, now representing 32% of all new lawsuits. Pending lawsuit volume remains consistent with last year, despite increased policy count. Just 3% of claims at First Notice of Loss take the form of lawsuits now, down 72% compared to 2022. Citizens reports its seeing a “significant impact” from the Notice of Intent to Litigate (NOITL) requirement, with cases being sent to appraisal, and resulting savings of $47.8 million in litigation expenses. Citizens is also ready to implement an arbitration program under the state Division of Administrative Hearings to specifically handle claim denials and policy limit exhaustions that the current NOITL system doesn’t really address.
LMA Newsletter of 9-25-23
