A few years back, several journalists began reporting about a new trend in product packaging: offering less product for the same price. One of these journalists, Michael Brush, dubbed PepsiCo’s subtle repackaging as, “The incredible shrinking Doritos bag.” Most companies cited rising costs as the reason for reducing sizes, but when the result ends up being higher profits and larger market share, those motives could rightfully be challenged. According to Brush and Harvard Business School Professor John Gourville, this strategy works because consumers don’t react to a change in quantity like they do to a change in price. Unfortunately for insurance consumers, this trend is finding its way into the insurance industry.

One example came last week, when Florida’s Citizens Property Insurance Corporation presented its most recent plan to the Financial Services Commission. The proposal is peppered with keywords like reduce, eliminate, discontinue, limit, restrict, phase out, and remove. The plan calls for less coverage for other structures and personal property, discontinuing builder’s risk coverage, raising sinkhole deductibles, reducing liability coverage, cutting increase mold coverage, adding sublimits to high value personal property such as furs and jewelry, expanding the vacancy exclusion, limiting law and ordinance coverage to only the main structure, and losing business income and extra expense coverage. Many reports also indicate that Citizens will be dropping coverage for items such as carports and screened pool enclosures, putting caps on coverage for cosmetic damage, and phasing out hurricane mitigation discounts. The plan would also shed much of Citizens’ risk, as Citizens tries to push the risk back to the private market.

If the economic research holds true, insurance consumers will react less to losing these coverages than they would to premium increases. It appears Citizens is trying to adjust its bottom line while avoiding the recent reaction consumers had to Citizens’ 2000% rate hike. Regardless of whether these price increases come in through the front door as premium hikes or through the back door as reduced coverage, they will have a profound impact on all Florida policyholders, especially for those carrying larger policies that cover condominiums and commercial properties.

To avoid this sneaky price increase, policyholders need to stay vigilant in the fight for proper coverage. Consumer advocacy groups such as Policyholders of Florida provide information and resources for protecting insurance consumers’ rights. Education and standardization may also help raise awareness over broad policy changes like those proposed by Citizens. Research has shown that consumers react differently to changes once they have become accustomed to a particular size or quantity of product. As Brush concluded his article, “don’t expect to see 11 eggs in a carton anytime soon.” As insurance consumers begin to expect certain coverages in their policies, it won’t be as easy for carriers to remove them from policies.