The governing board of Florida's insurer of last resort approved an average rate increase of at least 8.8 percent Friday for most of its homeowner policyholders beginning next year.
The Citizens Property Insurance Corp. hike could go as high as 10.2 percent on average if state regulators accept an alternative version taking into account the risks of a major hurricane striking the state. Officials contend these risk factors wouldn't count toward a 10 percent cap on annual increases mandated by state law.
The Citizens board could have opted for a lower 7.5 percent rate hike, but that would have been coupled with a new $15,000 limit on non-flood water damage. Several board members balked at that potential cost-savings measure, saying it would be far too low to cover damage from such things as burst pipes for many homeowners.
"I am opposed to any type of limit on water damage," said board member Nancy Baily. "It's a peril we need to continue to cover."
One option would be to set a water damages cap but still allow policyholders to buy additional coverage if they wish. Several board members said they would return to the issue in the future. Water damage not caused by floods is one of Citizens' major loss areas. The federal government sells flood insurance.
"I want to keep it on the table," said board member John Wortman.
The 2013 rate increase will be higher in certain areas prone to sinkhole damage, mainly in the Tampa Bay area.
State-backed Citizens has grown to become Florida's largest property insurer, with 1.4 million policyholders. Many private home insurers abandoned Florida as far too risky following the extremely active 2004 and 2005 hurricane seasons. Citizens now has a surplus of more than $6.1 billion, in large part because the state hasn't been struck by a hurricane since.
Citizens officials say its rates are far too low to remain competitive. It has been working over the past two years to shed policies by moving them into the private market, in part to prevent taxpayers from having to foot a big chunk of the bill if a major hurricane slams into Florida.
So far, getting rid of Citizens customers has been slow going.
Company Chief Financial Officer Sharon Binnun told the board Friday that about 100,000 policies have been shed over the past two years, including about 80,000 this year.
"That's a really good thing for Citizens," she said.
The proposed 2013 Citizens insurance rates proposals will be submitted to the state Office of Insurance Regulation, which has another 45 days to approve or disapprove them.