Sinkhole rate increases to be phased in
By James Call
Tallahassee, FL – Florida's largest insurance company has agreed to lower a proposed rate hike for sinkhole coverage that would take effect next year if approved by regulators. However, some consumer advocates say the requested hike is still too high and want lawmakers to impose a lower cap on rate increases.
The Board of Governors of Citizens Property Insurance Corporation, which underwrites about 16 percent of property insurance policies in the state, says the current situation is unsustainable. Last year Citizens collected $32 million in sinkhole premiums and paid out $245 million. Earlier this year, lawmakers lifted a 10-percent cap on Citizens rate hikes and the board responded with a request to increase premiums by 400 percent statewide. Governor Rick Scott supports efforts to make Citizens' rates actuarially sound. That is premiums are high enough to cover projected losses.
"What we have to make sure is that the rates they are proposing is fair. I mean they do have to be actuarial sound. They have to look at the fact that we did make changes this year so. It shouldn't be historical information so that is what I am hoping they will do."
Included among the changes the governor referenced are efforts to lower insurance company's expenses. Opponents to Citizens' rate hike questioned whether the state-created insurer took those changes into account when it proposed increasing rates by as much a thousand dollars in some counties. At an emergency meeting of Citizens board of Governors, CFO Sharon Binnun said a team of actuaries did and if lawmakers had not acted premiums would have been even higher.
"And the impact of that is approximately a 60-percent reduction in the sinkhole premium that was indicated. So what that means is if SB 408 had not been passed the rate indication would have been much higher. Would have been instead of 428 percent overall average would have been over a thousand."
Citizen's original request would have raised rates by thousands of dollars along sinkhole alley, a region roughly stretching from Tampa to Orlando. But Citizens revised its request to phase in actuarial sound rates over a few years with a 50-percent rate hike for 2012. That would still mean a $700 dollar increase for property owners in Pasco County. Senator Mike Fasano represents Pasco, he opposed the law which lifted Citizens 10 percent cap and says Citizens a 50-percent hike is unacceptable.
"They are absolutely unrealistic they are totally out of touch with what's happening in the state of Florida. And I'm disappointed. I'm disappointed with our governor; I'm disappointed with some of our cabinet members with our CFO. They should have stepped up, spoken out and said this is unconscionable, unaffordable. This will hurt our economy and citizens just need to wait until the Legislature comes back next year and take the issue up."
Citizens' request is now in the hands of state regulators. They like Citizens board of governors will try to walk a line found in a 2007 law passed by the legislature. It says that Florida has a compelling interest that property in the state is insured at an affordable rate balanced with actuarial sound rates. The Office of Insurance Regulation Commissioner Kevin McCarty says he will make a decision on Citizens request by Monday. If approved, the rate hike will go into effect January one.