Florida’s Citizens to Phase-In Big Sinkhole Insurance Rate Hike

Florida residents who have sinkhole insurance through the state-backed property insurer will see any premium increases phased-in over a number of years based on a new policy of the insurer.

The Citizens Property Insurance Corp. board of governors held an emergency meeting yesterday in response to a growing chorus of protest over a planned statewide average 429 sinkhole premium increase, which would see rates in some counties increase by over 2,000 percent.

The board voted unanimously to implement by an ‘overall average statewide and territorial premium increase for sinkhole coverage of 50 percent for the year, with new indications to be reviewed annually.”

The board’s action came one day before tonight’s public rate hearing in Tampa that is expected to draw hundreds of homeowners.

Carlos Lacasa, Citizens chairman, said the decision was in response to concerns by policyholders and state officials. He said “stair-stepping’ the increases would allow Citizens to collect some of the additional premiums that it needs while allowing time for a new property insurance law to take effect and ‘moderate future rate needs.’

The new law, SB 408, creates a statutory definition of ‘structural damage,’ places a two-year limit on claims, and creates a number of fraud provisions, among other things.

Insurance Commissioner Kevin McCarty, among other state officials, had expressed concern that Citizens failed to take into account a number of reforms when setting sinkhole rates.

Citizens’ Chief Financial Officer Sharon Binnun said that while it is difficult to project the impact of SB 408 on sinkhole losses next year, the reforms were a part of the actuarial calculations. Without the bill, she said, the proposed rates ‘would have been much higher.’

A staff analysis noted the insurer is projecting that the sinkhole provisions will result in a 60 percent reduction in it projected sinkhole premium need for 2012. This after the insurer paid out over $245 million in sinkhole claims last year while collecting only $32 million in premiums.

State Rep. Will Weatherford (R-Wesley Chapel), who represents the largest share of homeowners with sinkhole claims, said Citizens did the right thing by opting for the phase-in.

‘Floridians cannot shoulder such dramatic increases in the middle of a national recession,’ Weatherford said. ‘I believe that their actions are a significant step in the right direction.’

State Senator Mike Fasano (R-New Port Richey), who has been a critic of the proposed rate increases, said Citizens’ action still did not go far enough in preventing the sticker-shock many homeowners may be facing.

‘It is still unaffordable,’ Fasano said. ‘For some people, it will still be a $1,000 increase.’