Insurance News

Citizens proposes hefty sinkhole rate hikes

Posted on: August 1, 2011

State-backed Citizens Property Insurance plans to raise average statewide premiums for sinkhole coverage by 429 percent. Average premiums in parts of South Florida and the Orlando area would increase 13-fold and 21-fold, on average, respectively.

Its actuarial and underwriting committee will discuss the rates today and its board will vote on them Wednesday.

There are 84,908 policies in South Florida with sinkhole coverage, largely because it costs very little, about $3 to $20 on average. Citizens automatically adds sinkhole coverage to policies except in Pasco and Hernando counties.

Citizens Spokeswoman Christine Ashburn said the number of policies with sinkhole coverage may drop after the rate hike is implemented. “People can choose not to have this additional coverage,” she said.

The average sinkhole premium increases by region for homeowners, according to agenda materials posted online Tuesday, include:

195 percent, or from $14 to $41 for an average premium, in coastal Broward County; 1,244 percent, or from $4 to $53, in Fort Lauderdale and Hollywood; and 267 percent, or from $11 to $39, in the rest of the county.

709 percent, or from $13 to $102, in coastal Palm Beach County and 907 percent, or from $4 to $42, in the rest of the county.

402 percent, or from $20 to $101, in coastal Miami-Dade County and 1,316 percent, or from $3 to $46, in Hialeah. Increases in other parts of the county fall between that range.

185 percent, or from $5 to $15, in coastal Volusia County, and 2,125 percent, or from $4 to $78, in Orange County, excluding Orlando. Other parts of the Orlando area fall between that range.

A sweeping property insurance law passed this year, SB 408, allows Citizens to increase rates on the sinkhole portion of premiums without being limited by a 10 percent annual cap on premium increases.

The provision is intended to help Citizens collect enough premiums to pay costs associated with sinkhole claims. The insurer collected $32 million in sinkhole premiums for homeowners policies in 2010 and expects to pay out $245 million in claims expenses.

Sen. Mike Fasano, R-New Port Richey, a vocal opponent of the new law, said there are people in the Tampa area whose lenders require sinkhole coverage and if they can’t afford the rate hikes, they’ll be forced out of their homes.

“The sad thing is that this is only the beginning,” he said in a statement today. “The most consumer unfriendly piece of legislation in our lifetime, SB 408, also allows private insurers to do the same. I have no doubt they will quickly follow suit.”

Former Insurance Consumer Advocate Sean Shaw, an attorney in Tampa, has asked the state’s new consumer advocate, Robin Westcott to intervene on behalf of policyholders.

Westcott said she plans to take a position after the proposed rates are submitted to state regulators and her office has finished reviewing them. “If some of the proposed increases are implemented, many consumers in our state simply will not be able to afford the coverage. I would like the opportunity to examine this issue and ask the difficult questions on behalf of the policyholders affected by this proposed increase,” she wrote in an email. 

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