Florida's insurance regulator said today that certain small insurers used a legal loophole to charge homeowners unapproved high rates, and he ordered the state's insurer of last resort to provide them with lower-priced coverage.
Insurance Commissioner Kevin McCarty ordered the state-created Citizens Property Insurance Corp. to begin offering residential property insurance to Floridians whose policies had been taken out of Citizens by private insurers, but who are being charged unapproved rates.
Mr. McCarty announced that he issued the order in response to "thousands of policyholders having their policies taken out of Citizens, only to see their premiums increase dramatically beyond what they were previously paying."
Under Florida law, Citizens is required to charge rates that are higher than rates charged by private insurers. To achieve this, Citizens looks at the rates charged by the 20-largest insurers doing business in the state, and sets its rates above the average rate charged by those companies in any territory.
However, Mr. McCarty said the carriers that raised rates above Citizens fall below the 20-largest companies, and are not part of the calculation to make Citizens rates the highest.
In some cases, he said, these smaller companies have taken advantage of a provision in Florida law and have begun charging the increased rates prior to having them approved by the insurance commissioner.
"The Citizens takeout provisions which the affected policyholders fall under were written to achieve a good end. However, because of unintended consequences, these people have been hit with a financial nightmare," said Mr. McCarty.
He noted that the policyholders involved "were already being charged the highest insurance rates where they live, only to see their premiums skyrocket even higher. Clearly this is not what the law intended, but, fortunately, the law does allow the relief I am ordering."
Florida policyholders are eligible for coverage from Citizens if they are not offered a standard or basic policy, including wind coverage, at an approved rate by an authorized Florida insurance company
Mr. McCarty said he will recommend statutory changes to lawmakers that will provide a more efficient form of relief to Floridians who are put into similar situations in the future.
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