The landscape of Florida’s homeowners insurance industry is undergoing significant changes as private insurers have absorbed 275,324 policies from the state-run Citizens Property Insurance Corp so far in 2023. These changes, spotlighted during the recent Citizens Board of Governors meeting, demonstrate a strategic attempt to balance the market through a process called “depopulation.”
What Depopulation Means for Consumers
For consumers, the depopulation program has a direct impact on their insurance decisions. Here’s what it boils down to: if a private insurance company extends an offer that exceeds a policy owner’s current premium by up to 19%, the policyholder is obliged to accept it. Offers that are 20% or more above the Citizens’ rate allow customers the option to decline and retain their current policy with Citizens.
With 114,559 policies already transferred to private insurers in 2023, according to Citizens’ data, the market appears to be responding to these depopulation efforts.
Florida Homeowners Insurance Market on the Mend
Citizens’ CEO expressed optimism about the state of the market, attributing the recovery to these recent depopulation strategies. The company’s proactive approach, heralded by some as a sign of a stabilizing market, has facilitated the shifting of policies to the private sector.
In 2022, to encourage further depopulation, Florida lawmakers advocated a policy change mandating that Citizens customers should accept coverage from private insurers if the cost is within a 20% margin of Citizens premiums.
No Rate Reduction Expected for Remaining Citizens Policies
It is essential to note that policyholders who choose to remain with Citizens should not anticipate a decline in rates, even as the Florida insurance market shows signs of improvement. This lack of reduction is due, in part, to Citizens’ stance that the state’s limit on its annual premium increase result in rates that don’t reflect actuarial integrity.
Looking to California for Comparative Insights
Florida’s insurance model may potentially serve as a blueprint for California’s Fair Plan, which is experiencing a similar uptick in policy count. Florida’s introduction of eight new insurance companies into the private market is a contrast to California’s rigid regulatory environment, which has seen no such influx of insurance entities.
Could the adoption of a depopulation system help stabilize the California Fair Plan? That question remains unaddressed as Florida’s ongoing experiment continues to unfold.
In conclusion, Florida’s homeowners insurance market is charting a course toward equilibrium. While the depopulation system carries implications for premiums and consumer choice, its effectiveness in restoring industry health is currently being observed with cautious optimism. Whether this approach can heal similar market fractures in other states is a topic of watchful consideration.
