By Regan McCarthy
http://stream.publicbroadcasting.net/production/mp3/wfsu/local-wfsu-987519.mp3
Tallahassee, FL – Florida's Insurance Commissioner Kevin McCarty has denied a request from the state-backed insurance company Citizens Property Insurance to increase sinkhole coverage rates by 447-percent. As Regan McCarthy reports, the insurance regulator slashed the increase, setting a maximum hike of about 33-percent instead.
For years Florida's taxpayers have supported Citizens' sinkhole insurance through subsidies and bailouts. In 2010 the company paid out more than 200-million dollars in claims but collected only 32-million in insurance premiums. The disparity is due partly to the insurer's low costs, but also to the high number of questionable claims filed. Florida's insurance Commissioner Kevin McCarty says the number of claims made over the past few years has sky-rocketed.
"It's out of control. It's unsustainable. The number of increased severity and frequency of sinkholes is out of control. We've seen a quadrupling of that in a four year period."
Officials suspect many of the claims filed are fraudulent. The number of people who appear to be fixing their sinkhole damage with money provided by the insurance company continually low. A law passed by the legislature last session sought to right that. Senate Bill 408 laid down the law on what kinds of claims are acceptable and requires that the amount of money citizens brings in for sinkhole insurance more closely matches the dollars it shells out. Governor Rick Scott says the people of Florida need to be able to count on the company to have the funds to support them when they need them, but Scott says making that happen is walking a fine line.
"My goal is I want to make sure that Citizens is financially viable. I want to make sure the rates are financially viable and I want make sure it's fair to consumers."
And that's why Citizens officials say they need such a big increase. But Insurance Regulator Kevin McCarty says Citizens isn't taking into account the other aspects of the law.
"The legislature acted very boldly and made sweeping changes to how we evaluate sinkholes the definition of sinkholes, how we compensate public adjusters, and the elimination of what we think is some fraud and abuse in the system."
McCarty says Citizens used historical data and trended it forward to show that a 447-percent increase is needed. But he argues that information isn't credible. Since fewer claims should be filed he says that means fewer dollars will be needed. The state's insurance regulators approved about a 33-percent rate increase instead. For homes in Central Florida, and especially in the Hernando Valley area where sinkhole concerns are notoriously the worst, McCarty says that means about a $500 premium hike. That's compared with what would have been a multi-thousand dollar increase under Citizen's plan. Florida's chief Financial Officer Jeff Atwater says McCarty handled with situation well
"To take into account the work of the legislature to try to remove the fraud and the activity that has been so harmful in the marketplace and to get down there and getting consumers the right product at the right price and the right value. And I know it's no perfect science."
In a written statement, Citizens officials said the insurance regulator's maximum hike will be nearly equal to the rate cap the company had already imposed on itself for next year. Meanwhile, officials say they'll be looking into the impact that the new law has on the number of claims filed.