Water loss claims changing the math for Citizens

I want to commend the Sun Sentinel editorial board for addressing the issue of rising property insurance costs in South Florida with its Jan. 6 editorial, “Make Sure Citizens’ Claims Hold Water.” The editorial challenges Citizens and other stakeholders to examine the rising costs of insurance, particularly in the tri-county region of Palm Beach, Broward and Miami-Dade counties.

Most Citizens policyholders in Florida will see rate reductions in 2016 under a slate of recommendations approved in August by the Office of Insurance Regulation, which take into account historically inexpensive reinsurance, a stronger Citizens and a reinvigorated private market.

Unlike wind coverage rates, which depend on scientific models, determining rates for non-catastrophic losses is relatively straightforward. Simply put, what is predicted to be paid out to some policyholders in non-weather claims must be paid for by all policyholders in each region via higher rates established by OIR for Citizens each year.

Last month, Citizens’ Board of Governors approved changes to clarify policy language in an attempt to reduce litigation while ensuring legitimate claims are quickly and fairly paid. Those recommendations will soon be submitted to the Office of Insurance Regulation, which must approve any proposed policy changes.

State lawmakers in the coming weeks are expected to address potential changes Citizens believes are essential to keeping customers in the driver’s seat while helping control claims cost which must be paid by policyholder premiums. The issue is likely to spark vigorous debate. That’s good for at least two reasons. Insurance costs have a huge financial impact on all consumers and, based on our review, the challenge of spiking water losses is spreading to other parts of the state.

Chris Gardner is chairman of the Board of Governors for Citizens Property Insurance Corporation.