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Legislative session nears, insurance debate heats up (p. 2)

In our last post, we were discussing Senate Bill 408. The Florida Legislature will convene next week, and SB 408, the insurance bill, will probably generate some heated discussions. Two provisions in particular have garnered some strong opinions from insurance companies and policyholder advocates: claims payment, discussed in our last post, and sinkhole coverage.

Sinkholes are the target of much insurer wrath these days. Companies claim that the only way to cover the losses from sinkhole claims is to hike rates as much as 30 percent. The payout has far exceeded the premiums collected, they say.

The bill would drop the state's requirement that insurers include sinkhole coverage in the standard homeowners' policy. Insurers that wanted to offer the coverage could sell it, and those that didn't want to take the risk wouldn't have to.

At least one advocate says the sinkhole provision is part of insurers' attempt to create a "crisis." By stirring up controversy, the companies will be able to justify huge rate hikes. And, if it's so unprofitable, either no company will offer sinkhole coverage, or no homeowner will be able to afford it.

Others say that the policy language explaining the exclusion will be practically impenetrable to the average policyholder. It's already hard to understand what constitutes structural damage. With the law change, a house would have to be condemned before the insurance would pay the claim.

There are other changes laid out in SB 408, but, as we've said, these are really the big ticket items from the consumer's perspective. It should be interesting to see the insurers and insureds square off during the legislative session. Right now, the only thing everyone agrees on is that it's too soon to tell what the impact on policyholders will be.

Source: The Daytona Beach News-Journal, "Legislation reforms claims process," Tom Knox, 02/27/11

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