Opponents Battling Huge Sinkhole Premium Hikes

The board of Citizens Property Insurance Corp. approved rate increases that average 323 percent in part of a "sinkhole alley" county. A state senator has asked Florida Gov. Rick Scott and Chief Financial Officer Jeff Atwater to stop them from taking effect.

Obtaining insurance coverage for damage related to sinkholes may soon become much more expensive for residents of four counties on the western coastline of Florida. The state-backed Citizens Property Insurance Corp. (CPIC) approved big premium increases July 27, and opponents now hope state officials will prevent them from taking effect.

The state's insurance commissioner, Kevin McCarty, said Aug. 2 that he's prepared to phase in the large rate increases, The Miami Herald reported.

CPIC plans to replace existing Personal Residential Multiperil homeowners and dwelling fire policies in Pasco and Hernando counties with policies that exclude sinkhole coverage and will add catastrophic ground cover collapse coverage. Those who want to continue insuring their homes for sinkhole coverage would have to add a Sinkhole Loss Coverage endorsement for an additional premium, with an optional Sinkhole Deductible of 10 percent of the insured value of the home offered by the company.

State Sen. Mike Fasano, a Republican representing District 11, which includes parts of Hernando and Pasco counties, sent a letter Aug. 1 urging Gov. Rick Scott and Florida Chief Financial Officer Jeff Atwater to oppose the proposed rates. He claims the rate increases could force some residents out of their homes; the average rate increases are 200 percent in Pasco County, 323 percent in the coastal portion of Hernando County, 1,717 percent in the coastal section of Citrus County, and 2,045 percent in the coastal area of Pinellas County, Fasano says.

"If anyone believes that consumers can afford premiums even in the ballpark of what has been requested then they are truly out of touch with the economic reality facing everyday Floridians," the senator wrote. "Since the requests were made public constituents have contacted me with what is, for each of them, true horror stories of what will happen if the rates are approved. Just this day a senior citizen showed me a letter from her lender, U.S. Bank, which requires her to carry full sinkhole coverage. Citizens is no longer an option for her. She has nowhere to turn.

"Floridians who live in single-family dwellings are not the only ones who will be hurt by these increases. As you may know, current law does not allow homeowners associations, condo associations and manufactured home communities to opt out of full coverage. The rates that will be increased must be passed on the residents who live in these communities. Mortgage professionals have also contacted me to express their concerns. Those who broker the loans, which is part and parcel of the housing industry, predict economic disaster if these rate hikes are approved."

A state law enacted in 2010 removed the 10 percent per year cap on CPIC's rate increases, after the Florida Office of Insurance Regulation, which Commissioner McCarty heads, identified sinkhole claims as one of the cost drivers affecting homeowners rates. This change allowed CPIC to propose such large increases, and private insurers are likely to do the same thing, Fasano said.

The office in August 2010 asked commercial and residential property insurers to collect sinkhole claims data, and it issued a report in November 2010 showing that losses and claims rose significantly from 2006 to 2010, with claims being filed outside what the office called "the traditional 'sinkhole alley' in Hernando and Pasco Counties."

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