Florida’s largest insurer of homes and businesses has agreed to lower a proposed rate hike for sinkhole coverage that would take effect next year.
But some critics said the move didn’t go far enough and they still want state legislators to change the law that allowed the state-backed Citizens Property Insurance Corp. to propose increasing rates for sinkhole coverage by more than 400 percent statewide and as much as 2000 percent in counties such as Orange and Hillsborough.
The board that oversees Citizens held an emergency conference call Monday and voted to cap rate hikes for sinkhole coverage to 50 percent in 2012 and then phase in future hikes over the next several years.
The move comes amid a growing backlash from the public and politicians over the proposed rate hikes, which still must be approved by state regulators. Florida’s insurance commissioner is holding a public hearing Tuesday in Tampa that is expected to be attended by a large group of angry policyholders.
Carlos Lacasa, chairman of the Citizens board, said the decision to phase in the rate hikes was an attempt to highlight “the severity of the sinkhole claims crisis while allowing time” for provisions of a new state law to “moderate future rate need.”
State legislators this year passed a sweeping property insurance bill that they contended would help to drive down costs for private insurers and would help stabilize the state’s fragile market.
A significant portion of the new law took aim at sinkhole coverage and it allows Citizens to raise its rates to whatever level it believes is necessary to offset losses. Citizens currently has more than 1.4 million policyholders across the state.
In 2010, Citizens received about $32 million in premiums for sinkhole coverage with ultimate losses and loss-related expenses estimated to total $245 million. Since the last major hurricane hit Florida in 2005, sinkhole claims have skyrocketed, totaling nearly $2 billion in the last four years. Most of the claims have come from Hernando, Hillsborough and Pasco counties, part of the Tampa Bay area.
The new law includes provisions intended to cut down on sinkhole claims including putting a time limit on when claims could be filed.
Chief Financial Officer Jeff Atwater and other Republican leaders who backed the new law contended Citizens officials were not taking into account how it would cut down on claims.
“We have to have a financially sound insurance program … but we have to be fair to our citizens,” Gov. Rick Scott said on Monday.
Citizens officials have disputed that and said the sinkhole rate hikes would be twice as high without the new law. But the insurer’s board agreed to phase in the rate hike to see whether or not the new law would reduce claims.
Rep. Will Weatherford, R-Wesley Chapel and who represents homeowners in the area with the most sinkhole claims, commended Citizens for voting to phase in the rate hikes. Weatherford said that “Floridians cannot shoulder such dramatic increases in the middle of a national recession.”
“I believe that their actions are a significant step in the right direction,” Weatherford said in a statement.
But another lawmaker from Pasco County said the decision didn’t go far enough.
State Sen. Mike Fasano, R-New Port Richey, wants lawmakers to put back in place a 10 percent cap on rate hikes that applies to other types of Citizens coverage including coverage from hurricane damages.
“It’s still unaffordable,” Fasano said of the 50-percent rate hike proposed by Citizens. “For some people it will still be a $1,000 increase.”
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