Florida state audit confirms Citizens’ rates are too low
TALLAHASSEE, Fla. (Sept. 6, 2012) — A new report from Florida Auditor General David Martin confirms that the state-run Citizens Property Insurance Corp.’s rates are too low to allow private insurers to compete in the state’s property insurance market.
The audit, which looked at Citizens’ operations from 2008 through 2011, noted that the company’s stated goal of depopulating its book of 1.4 million policies is undermined by its relatively low rates, which are made possible only because of Citizens’ power to assess private insurers to fund post-event losses. Also hindering the depopulation process is state law allowing insurance agents and policyholders to opt-out of plans by private insurers to assume Citizens’ policies, which Martin noted “made it difficult for a voluntary insurer to take-out and retain policies.”
“This audit confirms what many of us have been saying: as long as Citizens’ rates are kept artificially low by politicians, private insurers will simply be unable to compete in Florida,” said R Street Florida Director Christian R. Cámara. “Although proposals have been discussed that may encourage private companies to take out and assume some Citizens policies, the only long-term, organic solution that best protects taxpayers is to allow market-based rate competition. This can only be accomplished if Citizens can charge rates on par with the private market that truly reflect risk.”
Citizens’ below-market rates are enforced by a state law that limits its annual rate increases to 10 percent a year. The company insures about 23 percent of the Florida market, with roughly 45 percent of Citizens policyholders concentrated in Miami-Dade, Broward, Palm Beach and Monroe counties.
Recent polling by Citizens showed that 79 percent of its policyholders and 89 percent of non-Citizens policyholders were not aware they could be charged assessments if Citizens were unable to pay its claims.
R Street is a non-profit public policy research organization that supports free markets; limited, effective government; and responsible environmental stewardship. It has headquarters in Washington, D.C. and branch offices in Tallahassee, Fla.; Austin,Texas; and Columbus, Ohio. Its website is www.redesign.rstreet.org.
