Florida Senator Mike Fasano lambasts insurers during sinkhole forum

May 18, 2012

The following article was published in The Tampa Tribune on May 18, 2012: 

Fasano Lambasts Insurers During Forum

By Carl Orth


NEW PORT RICHEY –A panel discussion Wednesday on sinkholes focused first on
the role of Citizens Property Insurance Corp.
Some 100 people at the forum, put on by the Council of Neighborhood Associations civic group, heard an often-contentious debate between state Sen. Mike Fasano, R-New Port Richey, and Barry Scarr, president of Scarr Insurance Group.

“Six years we’ve been rolling the dice,” Scarr said, referring to the time since the last hurricane threatened Florida.

Fasano dismissed such talk as “scare tactics.”

Residents continue to pay assessments on auto insurance policies to help pay off damage from previous storms. Scarr said that if a major storm strikes the state in the future, Citizens Property could charge assessments up to 45 percent of the regular premiums on a policy to help pay claims, he said.

Citizens was able to sell some bonds to raise more cash, but the state-backed insurer could not handle much more than $20 billion in claims from a major disaster, Scarr said.

Citizens, Scarr said, has “become the carrier of first resort instead of carrier of last resort” and the largest insurer in Florida. State officials need to encourage more private insurance firms to enter the Florida property insurance market, he said.

Private property insurers are unable to compete with Citizens because it has a cap on its annual rate increases the Legislature imposed, Scarr said.

While no hurricane has struck the state for years, homeowner insurance premiums have not gone down, Fasano said.

Fasano said the insurance industry has been raising the threat of a destructive 100-year storm and the claims it would generate to justify raising rates. The chance of such a storm — one so powerful it should occur, on average, only once a century — is less than half of 1 percent, he said.

At the same time, three-fourths of Citizens policyholders opted out of additional sinkhole coverage in recent years to significantly lower premiums. The main policy still covers a catastrophic ground collapse that makes a home unlivable.

Yet private insurers aren’t knocking at the door of Pasco homeowners and offering them property coverage, Fasano said.

“They’re not coming back,” Fasano said about private insurers in the Pasco market. “They lied to us. They have no intention of coming back.”

Fasano also criticized Citizens for high estimates of the replacement value of a house if destroyed by a storm. Lawmakers this year added options to challenge those Citizens’ estimates.

“Don’t you wish you could sell your home” for the replacement value that Citizens calculates?” Fasano asked. “It’s absurd.”

Scarr said Citizens either needs to raise rates or reduce its exposure to disaster claims.

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