October 20, 2009
TALLAHASSEE – At today’s Office of Insurance Regulation (OIR) public rate hearing, Associated Industries of Florida (AIF) urged Insurance Commissioner Kevin McCarty to order Citizens’ Board of Governors to fully implement the 2009 “rate glide path” legislation by increasing all rates by 10 percent. The legislation not only removed the freeze on Citizens’ rates, but also authorized an increase not to exceed 10 percent on policies issued or renewed on or after January 1, 2010. Contrary to the “guide path” legislation, Citizens’ Board in July recommended up to 10-percent decreases for many policyholders and did not fully increase rates by 10 percent for others.
The across-the-board 10-percent increase, including the “wind-only” policies that will be considered in Nov., would generate an additional $211.5 million in revenues necessary to help offset the huge deficit in funds Citizens would need to pay claims following a Category 2 or greater hurricane. According to Citizens’ own actuaries, its rates must be increased by nearly 50
percent in order to become actuarially sound and to have sufficient funds to pay claims without imposing a “hurricane tax” on all automobile and business insurance premiums.
“AIF and our members are outraged with the Board’s recommendation to actually decrease rates for certain customers,” said Barney Bishop III, President and CEO of AIF. “If OIR accepts these recommendations, they do so on the backs of Florida’s small businesses, car owners and nonprofits as they are the ones who will end up covering the costs of Citizens’ claims. Florida businesses therefore will foot the bill for 40 percent of these ‘hurricane taxes.’”
The Citizens Board’s filing of rate decreases and failure to implement all rates by 10 percent, despite the objection of Chairman Jim Malone, will substantially reduce the amount of potential new revenues to the financially ailing insurance company.
“We have been very fortunate to not have an active storm season so far this year. But, how much longer can we hold our breath and hope against hope that Mother Nature won’t bankrupt Florida?” added Bishop. “Since 2006, AIF has consistently warned that Florida’s property insurance market is a house of cards and it will only take one storm to bring it all tumbling down.
We supported the ‘glide path legislation’ because we thought it would take the state in the right direction, but are disappointed that Citizens has interpreted the law to allow for rate decreases and less than the full 10-percent increases. We hope Commissioner McCarty will carefully consider the impact his Citizens’ rate decision will have on millions of businesses, automobile owners and our state’s economy in general and balance it with the interest of Citizens’ policyholders”