After take-outs and rate hikes, Citizens rates more 'actuarially sound'

Gov. Rick Scott blazed into office with big talk about minimizing taxpayer risk with state-run Citizens Property Insurance Corp.

Since Scott took office, Citizens has shed hundreds of thousands of policies and increased rates for consumers. While that may not sound like happy news for, say, Citizens policyholders, it's helping Scott meet his goal to revive private insurance as the first option for hard-to-cover properties.

During his 2010 campaign for governor, Scott promised to work with the Legislature to "ensure that Citizens consistently operates on actuarially sound rates."

"Actuarially sound" is a turnoff of a term that just refers to when an insurer's premium payments are enough to cover projected claims during a major storm without turning to extra "hurricane taxes" levied on everyone, not just Citizens customers.

For Citizens to move in the direction Scott wants, the company would need to raise rates up, up and up, more in line with the private market. The holdup is the company is not allowed to raise rates by more than 10 percent a year.

We moved Scott's pledge to Compromise on our Scott-O-Meter in August 2011, just a few months after Scott signed a law that allowed Citizens to lift a 10 percent cap on sinkhole rates. It was a move in the direction Scott wanted, even though the company could not do the same for premiums across the board.

A lot has happened since that update, with Citizens executives making controversial decisions that include firing Office of Corporate Integrity employees and spending lavishly on corporate trips. Much has happened to reduce the company's policy load and increase rates, too.

August 2012 saw a peak of 1.5 million ratepayers in Citizens. As of August 2013, the count is down to about 1.2 million. Citizens spokesman Michael Peltier says the number has not been below 1 million since 2006.

How? More Citizens policyholders have been pushed into the private market through the company's efforts to entice private companies to take out policies. And Scott signed a 2013 law that will result in a "clearinghouse" for Citizens that will work to redirect policyholders to comparable private coverage starting January 2014.

Citizens will still retain the worst properties to insure, which Peltier said makes sense given the insurer's original mission as a last resort.

While the clearinghouse option does not exactly create more actuarially sound rates, Peltier said, moves like it leave the company in better fiscal shape by reducing its exposure, or the value of all it insures.

Plus, Citizens data show the company is managing to offer rates that are closer to "actuarially sound" than they used to be.

In 2011, the company would have needed to hike homeowners' rates by about 57 percent to be actuarially sound. That fell to 48 percent in 2012, to 32 percent in 2013, and to 18.3 percent in 2014, according to the company's most recent rate filing with the state.

"The 2014 filing continues our steady progress towards actuarial soundness while moderating the actual premium increases by no more than the allowable 10 percent per-policy glide path," wrote company Paul Kutter, Citizens actuarial research manager.

Based on recent developments, we've decided to move Scott's promise back to In the Works.