THE NEWS SERVICE OF FLORIDA: Citizens Property Insurance approves scaled back sinkhole rates
Oct 12, 2011
The following article was published by THE NEWS SERVICE OF FLORIDA on October 12, 2011:
Citizens Property Insurance approves scaled back sinkhole rates
By Michael Peltier
Following through on a decision made by the Office of Insurance Regulation last month, the board of governors for Citizens Property Insurance Corp. on Wednesday approved statewide residential sinkhole premium increases of 32.8 percent.
The rate, approved without discussion in a conference call, is considerably less than the 447-percent increase the board approved last month. The panel also approved a non-sinkhole rate increase of 6 percent.
In July, Citizens approved the massive sinkhole rate hike but in September called for phasing in the increases and capping rate hikes at 50 percent of current premiums. The state- backed insurer handles more than 1.5 million policies. Following a hearing in Tampa, OIR rejected the rate hikes, which in some cases exceeded 2,600 percent, saying recent changes in state law regarding sinkholes need time to work before determining what future costs may be incurred by the state-back insurer.
The decision will have the most impact in a handful of counties that make up “Sinkhole Alley.” Pasco and Hernando county customers will see sinkhole rates increase by about $300 instead of the $4,000 to $5,500 that Citizens had originally requested. Policyholders in Hillsborough County will see increases of about $100 instead of the $3,200 increase that Citizens had set in July.
Citizens officials have said they were required to ask for the hefty increases after lawmakers passed SB 408 earlier this year. Among its many provisions, the bill requires Citizens to charge “actuarially sound” rates for sinkhole coverage.
Last year, the company collected $32 million in sinkhole premiums, but paid out nearly $250 million in claims. Without the changes, Citizens officials said last week that losses next year could eclipse $550 million. Even with the law, the insurer said it will still lose $219 million. That’s by no means “actuarially sound,” as lawmakers have required, the company says.
Critics led by Sen. Mike Fasano, R-New Port Richey, said the rate hikes were exorbitant and would force some owners out of their homes while making them more difficult to sell. After taking testimony and grilling Citizens actuaries last month, OIR determined that the state-backed insurer failed to make its case.
On Wednesday, the board said it will abandon its phase-in schedule and instead come back to regulators next year for additional increases.