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Gallagher: Hike proposal is flawed

By TOM ZUCCO
Published February 2, 2006

If tonight's public hearing in Clearwater on proposed double-digit rate hikes by Citizens Property Insurance is like a similar hearing in Miami on Wednesday, state insurance officials are in for a long night.

Several angry South Florida residents complained to officials about a plan to raise rates for windstorm coverage by 45 percent on average after some premiums have more than doubled over the last year.

Steve Burgess, Florida's insurance consumer advocate, suggested the Citizens rate increase should be 2.9 percent.

The rate increase has become a political football. Tom Gallagher, Florida's chief financial officer and a candidate for governor, said Wednesday Citizens should not be allowed to arbitrarily raise rates without justifying them. Gallagher called for federal and state solutions to strengthen the property insurance market and expand coverage options.

According to Gallagher, the first flaw in Citizens' rate filing is administrative. Citizens is asking for higher rates based on the industry's expenses, which are significantly higher than the expenses that Citizens incurred.

The second weakness, Gallagher said, was Citizens' plan to use some of the higher premiums to build up cash reserves. Citizens says the extra money would reduce the likelihood of a future statewide assessment on property owners after heavy hurricane losses. Citizens, Gallagher contends, does not have the statutory authority to build its reserves that way.

Citizens' latest request is the second part of a nearly 70 percent rate hike.

The state's insurer of last resort reported Tuesday it expects a 2005 deficit of $1.36-billion on its most risky homeowners policies. That's up from a $1.1-billion projection in November.

[Last modified February 2, 2006, 02:15:36]