Florida Insurance Commissioner Kevin McCarty said the proposed increases, even if actuarially sound could still be a hardship for individual policy holders. McCarty said he couldn’t say for sure, though, because he hadn’t reviewed the formal rate request.
Sinkhole rates, in particular, have skyrocketed in recent years. Last year, Citizens collected about $32 million in sinkhole premiums but paid out more than $245 million in claims.
“We’re going to explore the full range of options,” McCarty told reporters following a brief presentation to the governor and Cabinet.
Citizens last week sent shockwaves across the coast as its board agreed to ask regulators for rate increases for sinkhole coverage in response to legislative changes made under SB 408.
Pasco County residents, who live at the epicenter of recent sinkhole claims, would see average sinkhole premiums jump from $441 to $4,017, an increase of 810 percent for the optional coverage, which is required by some mortgage lenders.
Citizens staff said that while many of the proposed premiums indicate incredible percentage increases, the actual increased costs would be far less dramatic for some homeowners. In Jackson County, for example, Citizens rates for sinkhole coverage increased by 6,461 percent. But in dollar terms, that would amount to an increase of from 68 cents to $44 a year.
Citizens officials have said the company has to raise rates because of changes lawmakers made earlier this year.
Nevertheless, the proposed rate increases have drawn fire from lawmakers, particularly those in sinkhole-prone areas. Their cries were echoed Tuesday by Chief Financial Officer Jeff Atwater, who said Citizens should develop a “glide path” for boosting sinkhole premiums.
Other changes of SB 408, Atwater said, will help reduce payouts by fighting fraud, limiting the timeframe for filing claims and restricting what types of damage is covered. Taken together, those changes should be reflected in the rates.
“I think the legislation is going to bring some great value in lessening fraud and lowering payout,” Atwater told reporters after the meeting. “If the legislation is going to knock down fraud, why would we penalize people on a going forward basis?”
When Atwater was Senate President, lawmakers approved a measure that capped Citizens’ increases to 10 percent a year statewide – a moved blamed by many for the current situation where the company finds its rates too low to cover claims. Atwater said Tuesday, however, that he still favors some sort of cap going forward, but did not specify what it should be.
“I believe there needs to be a real different look-see from OIR and I think the commissioner recognizes this,’ Atwater said.
On Tuesday, McCarty said the agency will take the legislative changes into account when reviewing Citizens’ rate request, but he cautioned that rates have been artificially suppressed for several years and said even modified rate hikes will likely be significant.