Florida'sCitizens Property Insurance Corp. moved one step closer to implementing a significant increase in sinkhole coverage rates when the board that oversees the agency unanimously voted in favor of the hike. If the increase is approved by the Florida Office of Insurance Regulation, policyholders would see their sinkhole premiums jump by an average of 429% and up to 2000% in parts of the Tampa Bay area.
Citizens officials have said the increases are necessary to bring premiums more in line with the losses it sees on sinkhole claims. During the past nine years, Citizens has paid out more than $1 billion in sinkhole claims. Last year alone, Citizens collected some $32 million in sinkhole premiums and paid $245 million, according to figures provided by Citizens.
Citizens is a not-for-profit, tax-exempt government corporation that serves as an insurer of last resort for Florida residents.
The current average sinkhole premium is $156 annually in Tampa, and $260 for Hillsborough County residents outside of Tampa. That premium would jump to $3,651 under the proposed filing.
Residents in coastal areas of Pasco County, who currently pay an average of $1,270, would see premiums rise to $3,598, while other county residents who currently pay an average $1,475 would pay $4,440. Residents in coastal areas of Hernando County, who currently pay an average $1,356, would pay $5,734, and other county residents, who currently pay an average $1,084, would pay $6,192.
"These numbers highlight the significance of the sinkhole crisis in Florida," said Citizens spokeswoman Christine Ashburn earlier this week when the actuarial and underwriting committee of the state-run insurer approved the plan (BestWire, July 27, 2011).
Critics of the rate increase have said if Citizens' premiums rise, other insurers will likely follow suit, pointing to a property insurance law passed earlier this year that was designed to address cost drivers in the system. That bill, S.B. 408, exempts sinkhole coverage from the state-mandated 10% rate cap on Citizens (BestWire, May 18, 2011).
"The sad thing is that this is only the beginning," Sen. Mike Fasano, whose district includes parts of Hernando and Pasco Counties, said in a written statement this week. "The most consumer-unfriendly piece of legislation in our lifetime, S.B. 408 also allows private insurers to do the same. I have no doubt they will quickly follow suit."
The top five writers in the Florida homeowners' multiperil market in 2010 were Citizens Property Insurance Corp., with a 16.06% market share; State Farm Group, with 13.61%; Universal Insurance Holdings Group, with 8.38%; USAA Group, with 4.87%; and St. Johns Insurance Co. Inc., with 3.44%, according to BestLink, which provides online access to A.M. Best's database of insurance information.
(By Jeff Jeffrey, Washington Correspondent: jeff.jeffrey@ambest.com)
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