A 3.2% increase for multi-peril policies was approved instead of a requested 6.2% hike; a request to charge actuarially sound rates for new customers was also rejected.

TALLAHASSEE, Fla. – Regulators have scaled back rate increases sought by Citizens Property Insurance Corp., dealing a blow to leaders of the state-backed insurer who argue it needs to charge more for coverage.

The Florida Office of Insurance Regulation released details Tuesday of rate increases that will take effect Aug. 1, including decisions that reduced amounts sought by Citizens.

As an example, Citizens requested an average 6.2% increase for homeowners’ multi-peril policies – the most common type of policies – but regulators approved a 3.2% increase.

Regulators also rejected a series of moves that Citizens proposed to boost rates. Perhaps the most far-reaching decision involved a proposal by Citizens to charge actuarially sound rates for new customers – a move that would have effectively led to many new customers paying more than current customers.

State law limits rate increases for existing customers to a maximum of 10% a year. Citizens officials contend that limit, dubbed a “glide path,” has led to many customers paying less for coverage than they should.

“Citizens’ recommended rates include a provision requiring that new business policyholders be charged the actuarially indicated rates, while renewing policyholders would be subject to the 10% statutory glide path. … The office finds the justification for this provision to be insufficient and that all policies, whether new or renewal, should be subject to the same capping,” an order signed by Insurance Commissioner David Altmaier said.

Similarly, the order rejected a proposal by Citizens to include what is described as a “risk factor” in its rates, which would have helped lead to larger increases.

“Citizens’ recommended rates include a provision described in the rate filings as an estimate of the amount extra Citizens should charge for the cost of catastrophic risk that Citizens is assuming,” the order said. “The office finds the justification for the provision to be insufficient and that it should be removed from the rate determination.”

The office released the details amid a legislative debate about proposals to make changes in the state’s property insurance system, as the industry says carriers are sustaining financial losses. Private insurers during the past year have filed dozens of requests for large rate increases and have shed policies.

Many of those policies have ended up at Citizens, which was created as an insurer of last resort. As an indication of the growth, Citizens had 569,868 policies as of March 31, up from 446,327 policies a year earlier.

The growth has alarmed Citizens leaders and many lawmakers, at least in part because of concerns about financial risks if the state gets hit by a major hurricane or multiple hurricanes.

Citizens staff members initially proposed an average 3.7% increase in residential rates to take effect in August, but the Citizens Board of Governors in December requested that staff seek ways to increase rates more. That led to a series of changes proposed to the Office of Insurance Regulation, which has to sign off on any increases.

The office’s decisions will lead to varying increases for customers based on factors such as types and locations of homes or other structures. Along with approving an average 3.2% rate increase for homeowners’ multi-peril policies, regulators approved an average 5.1% hike for homeowners’ wind-only policies, down from a Citizens request for a 7% increase.

As another example, regulators approved an average 9% increase for mobile-home owners’ multi-peril policies, down from a Citizens request for a 9.3% hike.

News Service of Florida