The sinkhole insurance premium increase debate is over, for now. Florida’s state-backed insurer, Citizens Property Insurance Corp., will not get the rate hike it initially claimed it needed.
Sinkhole coverage has been a hot topic in the state for some time now. Insurers accuse homeowners of exaggerating the frequency of sinkholes and overstating the severity of the damage. Experts have weighed in on both sides.
Citizens shocked regulators earlier this summer when it requested a 447 percent statewide average rate increase. The Florida Insurance Commissioner has cut that to 32.8 percent.
The commissioner suggests that the insurer should share the credit. The company recently proposed a 50 percent cap that the commissioner says is “very similar” to the final rate.
Many believe that Citizens’ original proposal failed to account for the law changes that took effect this year. The company countered that the reforms would take time to make their way to the company’s bottom line. The final rate will bolster the company’s premium income as the new law takes effect, according to a Citizens representative.
The reforms passed this year include limiting coverage to principal structures, as well as a radical change in the definition of structural damage. The law also includes provisions for a neutral evaluator of each claim.
So, the debate is over, but just for now. Legislators are already gearing up for a renewed effort to block rate increases for sinkholes during the next session. One lawmaker has pledged to sponsor a measure to return the rate cap to 10 percent.
The question of Citizens’ financial stability remains. The governor restated his goal of making Citizens more competitive with private insurers. Several legislative proposals are already under consideration.
Source: Insurance Journal, “Citizens Goes Along with Florida Sinkhole Rate Decision,” Michael Adams, Sept. 23, 2011Share