Just Ask Tim - Blog
Citizens Insurance, regardless of need to increase prices, cannot increase their rates more than 10% per year by Florida law. This was done to maintain a reasonably priced choice for home insurance buyers when they could not find an alternative in the traditional insurance market. However, over the past few years many things have changed.
First, in 2020 reinsurance rates have dramatically increased. This is the insurance that insurance companies buy. So, the traditional market was forced to pass these rate increases on to their customers. This is one of the reasons home insurance rates in Florida have been increasing by double digits this year. Many companies increased their rates from 15% to 40% to compensate for the cost of reinsurance.
Second, in 2021 reinsurance rates are expected to increase again. We will not know the extend of these increases until late May, but the expectation is for another set of double digit increases in 2021. That means consumers could see their home insurance rates increase by 60% or more over a two-year period.
Third, home insurance rates increased approximately 20% from 2016 to 2019 in response to hurricanes Matthew and Irma. Put this on top of what was discussed below, and it is easy to see why homeowners are screaming about their home insurance rates more than doubling over the past four years.
So, what does all this have to do with Citizens Insurance? Since Citizens Insurance is limited to no more than a 10% increase per year their rates have fallen way behind the traditional market. This is leading to their market share to increase at an alarming rate and at premiums well under what is needed to be profitable. MOST HOMEOWNERS DO NOT KNOW THAT IF CITIZENS CANNOT PAY LOSSES, THEY ARE ALLOWED BY THE STATE TO ASSESS FLORIDA HOMEOWNERS TO MAKE UP THE DIFFERENCE!
State lawmakers are overly concerned. A proposal is being presented to the Citizens’ Board of Governors to discuss a proposal to adjust the law so that Citizens can increase rates to a more profitable level and to slow the rate at which homeowners are moving from the traditional insurance companies to Citizens.
If the proposal were accepted and the law changed, then Citizens could increase their rates by more than 10% in 2021. How much they would increase is unknown, but they have a long way to go if they want to be adequately priced and not the most competitive price in the market.
Stay tuned, we will keep you updated. You can always call us at (954) 678-2658 or visit us at www.JustAskTIM.com