State-backed Citizens Property Insurance is seeking a statewide 429 percent rate hike for sinkhole coverage, but Floridas top insurance regulator said Tuesday that new protections against frivolous claims were likely not taken into account.
Citizens board of directors approved the rate request, which would hike rates in some sinkhole-prone areas by more than 2,000 percent, due to the large losses they have incurred in recent years as sinkhole claims have skyrocketed. Last year, Citizens --which with 1.3 million policyholders is the largest home insurer in the state --gathered $32 million in sinkhole premiums but paid out $245 million in claims.
But during a Florida Cabinet meeting Tuesday, Office of Insurance Regulation Commissioner Kevin McCarty said that while he has not seen the official request, Citizens did not seem to factor in the suspected savings brought by SB 408, a new law designed to cut down on fraudulent claims and ensure that paid claims go to home improvements.
(Citizens) has not accounted for the potential cost-savings generated by the Legislature, McCarty said, adding that he will consider the impact of the new law when determining whether to approve the request.
McCarty was questioned by Chief Financial Officer Jeff Atwater, who expressed concern that the massive rate increase was too much too soon. While an increase is needed, he said, it may not need to be as high as 429 percent, and should possibly be phased in over a few years. Instead of relying on previous losses, the new law shouldfactor-in in forming the rate request, he said.
What I took from reading what they voted on with Citizens is they lookedonly at experience, and they did not take in the benefits of the new changes that took place. And did they have to go in all at once or could they not have proposed by historical -- theyve filed rate filings with the state before -- could they have not phased this in? So also more of the benefits from the law could have been seen in the short-term, Atwater said.
Yet Citizens claims it did factor SB 408 into its rate request.
"Citizens did in fact take into consideration the provisions of Seante Bill 408 when preparing our sinkhole rate filing. When evaluating expected sinkhole losses into the future, we adjusted our assumptions to the lower end of the range to account for the anticipated favorable effects of Senate Bill 408," said Citizens spokesperson Candace Bunker.
In addition to providing some protection against sinkhole losses, SB 408 also allows Citizens to exceed its 10 percent annual rate increase cap for sinkhole premiums. Some legislators who supported the law, however, were shocked at the extent of the rate increase. Rep. John Legg, R-Port Richey, has stated Citizens should wait to see the effect of SB 408 before proposing such a high increase.
Meanwhile, opponents of the new law are enjoying an I told you so moment. Sen. Mike Fasano, R-New Port Richey, fought to weaken SB 408 but was unsuccessful in trying to get it killed. Last week he decried the proposed increase, and wrote to McCarty asking him to hold local hearings around the state to consider the request, instead of the traditional Tallahassee hearings, so more people could be heard.
McCarty said he was open to the idea, but cautioned there is a short span of time to set up such hearings. The OIR must make a decision on the rate request 45 days after it receives the filing.
We understand Senator Fasanos concern. We do have a very tight timeline, its statutory-generated, its not something that I can have any flexibility [over]. Having multiple hearings would certainly be very time-consuming, McCarty said.
Bunker said Citizens sent their homeowners' rate filing in late Tuesday.
Reach Gray Rohrer at grohrer@sunshinestatenews.com or at (850) 727-0859.
