Residential property owners in Florida could potentially save up to from 4 to 14 percent on the sinkhole portion of their home insurance premium due to changes in coverage enacted earlier this year.
However, since the sinkhole provision is a limited portion of the overall policy, the effects on the total premium will be less.
While the entire state is prone to sinkholes, in the region of Florida referred to as “the epicenter of sinkhole activity,” residential policyholders may see a more than negligible reduction in their annual premiums. Florida Insurance Commissioner Kevin McCarty has identified the counties of Citrus, Hernando and Pasco as entitled to the higher savings from changes the state Legislature ordered when it passed SB 1980. Policyholders in these areas could experience a 4 percent reduction in their overall premium, while policyholders in other areas not affected by sinkholes might not see significant changes to their premium, according to McCarty’s Office of Insurance Regulation.
The legislation reduces attorney fees and court costs associated with challenges related to sinkhole claims settlements. Its supporters hope it will reduce costs by eliminating invalid claims, and reduce or eliminate settlement payments to circumvent litigation.
“This is a win-win situation,” McCarty said. “Not only do revisions in the law reduce court costs, but the legislation mandates these savings be passed to the policyholder.”
To determine potential savings, the OIR contracted the services of Deloitte Consulting to interview regulators, insurance companies and plaintiff’s attorneys knowledgeable in this area of the law. Deloitte estimated a range of savings between 4.8 percent and 14.4 percent. After conducting its own review, the OIR accepted the high-end of this range as the presumed factor of savings.
The savings factor will be implemented immediately and affect all rate filings sent to the OIR after October 1, 2006.
Source: Florida OIR
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