Column: ‘Gaming’ the Insurance System Hurts Us All

Apr 27, 2011

The following article was published in the Tallahassee Democrat on April 27, 2011:

Kathy Fain:  “Gaming” the Insurance System Hurts Us All

Florida homeowners are finding it increasingly difficult to get good, affordable insurance coverage.

Many companies have left the state, some are significantly under-funded, and others are limiting their policy-writing here.

This is a result of increasing costs within the system driven by poor public policy — even without any hurricanes in the past five years. Due to loopholes in the law, some Floridians are “gaming” the property insurance system and getting paid for something they didn’t actually replace or repair. But that’s legitimate under current Florida law.

Some of the problems driving up the costs of homeowner’s insurance for Floridians could be eliminated if payments were made when repairs are actually done, or when the property lost is actually replaced. Currently, companies must pay for the full replacement costs up front.

Second, wouldn’t it seem obvious to most people that they had suffered a loss to their property minutes, hours, days or weeks after something happened?

Yet Floridians have up to five years to file a claim. Some public adjustors have created a lucrative “cottage industry” by visiting neighborhoods and offering free goods to encourage consumers to file claims. They promise significant payment from insurance companies — for up to five years after the event. This has to be stopped.

Another cost driver is the exploding number of sinkhole claims, even in areas that historically have had little to no sinkhole activity.

Insurance companies are not bringing in the appropriate premiums to cover these claims. In 2009, Citizens Property Insurance Corp., which we all support through assessments on our insurance policies, received $19.6 million in premiums for sinkhole coverage, but paid out $97 million in claims.

Citizens is already woefully underfunded. Who do you think is going to pay the difference? All consumers of insurance in Florida, that’s who. Just watch your assessments increase year after year as this deficit is paid.

Florida’s legislators must make it a priority to reduce costs and close loopholes in order to make the market a better place for consumers to buy coverage at reasonable prices. They have the opportunity this year to do so by supporting Senate Bill 408 and the companion House Bill 803.

Otherwise, things will only get worse when the wind blows again in Florida.

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