Following years of frustrating, heartbreaking, budget-draining price hikes, Citizens Insurance is lowering its rates for a huge chunk of Florida homeowners.
The state-run insurer of last resort said on Monday that more than half of its homeowners’ insurance policyholders will see rate reductions next year. Homeowner rates will dip an average of 3.2 percent; mobile home owners’ rates will fall 3.9 percent, according to the taxpayer-backed insurer.
“A combination of factors over the past few years has made it possible for Citizens to reduce its 2015 rates for nearly 70 percent of its policyholders,” the company said in a statement.
Citizens proposed the adjustments in its newest regulatory rate filing with the Florida Office of Insurance Regulation, which reviews insurance company rate changes.
To explain the rationale for its long-awaited reversal from raising rates, Citizens explained it has amassed a $7.3 billion surplus to pay claims, that it can now buy reinsurance at lower rates, and that rate hikes over the past four years have improved the company’s financial health – what the company calls ‘actuarially sound’ rates.
“The majority of Citizens policyholders will see an actuarially sound rate that is similar to last year’s indications or even a bit lower,” Citizens said.
But there’s a catch. Even if a homeowner’s base rate declines, the annual premium they pay right still rise in 2015.
We have the improving economy to blame.
Homeowners insurance rates establish only how much a homeowner must pay per $1,000 of insured value. So, an increase in the home’s reconstruction cost can drive the annual policy premium higher -- even if the insurance rate dips.
Home values and construction costs are rising. So, Citizens is warning that its welcome rate reduction might not actually result in a savings for consumers.
“Increasing a home’s insured value and other coverage limits can increase premium,” Citizens said.
The twisted math is exasperating. As soon as we score a break, something else eats negates it. But it could be worse. Insurance rates and reconstruction costs could both be climbing at the same time.
Fortunately, they are going different directions – for the moment.
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