Florida’s state-run insurance carrier, Citizens Property Insurance, has requested rate hikes that could take homeowners by surprise. Regulators say most of the new rates will be approved without debate, with one exception: the proposed increase for sinkhole coverage.
The state’s chief financial officer is encouraging regulators to scrutinize the sinkhole increase to make sure it was calculated under the new law rather than past experience.
The Legislature passed an insurance bill this year that significantly revised how sinkhole claims are filed and paid out. Citizens had taken a serious hit with sinkhole claims in 2010: The insurer paid out $250 million in claims but took in only $32 million in premium.
Citizens is asking for enormous increases for the coverage. Currently, the average homeowner pays $350 to $450 for the insurance. Under Citizens’ proposal, the average would quadruple, to about $1,500. Coverage in areas that are particularly at risk could go up as much as 2,000%.
We have often written about Citizens’ statutory 10 percent cap on annual rate increases. While other property coverage offered by Citizens must abide by that cap, sinkhole coverage was excluded this year (another provision of the insurance bill). The insurance commissioner says the cap had created a “pent-up need” for rate increases. Apparently, the insurer wants to catch up on five years of under-rated coverage all at once.
If the rates pass muster, the CFO says he will urge regulators to phase in the increases. Implementing such an enormous hike all at once wouldn’t be fair to homeowners, especially those who are required to carry sinkhole coverage.
Source: Herald-Tribune, “Sinkhole rate hike approval likely,” Gary Fineout, Aug. 2, 2011Share