The ongoing story of citizens, sinkholes and rate increases

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The following is a guest post from Greg Giordano.

On March 1, 2006 State Senator Mike Fasano called to order the first ever public hearing in Pasco County that brought officials from Citizens Property Insurance Corporation and their policyholders from the Tampa Bay area together.  They discussed, and sometimes engaged in angry retorts, about their rising premiums and the looming specter of sinkholes along Florida’s West coast.

“It is my hope that when we adjourn this afternoon we will all have a better understanding of both the insurance crisis that is plaguing our community as well as some of the plans to reign in the rapidly rising insurance premiums so many of us are being forced to pay.” Senator Fasano stated at that event.  “Through past and present legislation my colleagues and I are attempting to make the insurance market as consumer friendly as possible.”

The senator’s desire to convince his colleagues in Tallahassee of the brewing premium crisis culminated during a 2007 special session of the legislature. Senator Fasano championed a rate freeze which was imposed upon Citizens premiums. Additionally, the legislature created a pilot program which allowed policyholders to opt-out of full sinkhole coverage if they wished to do so.  Customers were given the chance to pay for full sinkhole coverage or choose the lower premium coverage known as catastrophic groundcover collapse.  In the several years since a majority of Citizens customers have opted for the less expensive coverage.  However, many lenders have required full coverage for people with mortgages or other liens on their property.

Once the freeze was lifted the legislature imposed a 10% cap on Citizens premiums, meaning that rates could not go up, for any reason, more than 10% per year.  The cap allowed Citizens to recoup monies lost during the “hurricane years” of the past decade, while keeping insurance somewhat affordable for policyholders.

Fast forward to August, 2011 and those very same policyholders are now faced with the possibility of sinkhole rate increases that could amount to 2000%  based on their  county of residence (429% statewide average).  The reason for this is the fact that the cap was partially wiped out in 2011 when the legislature passed, and the governor signed, Senate Bill 408.  Senator Fasano, who saw many aspects of the bill that were consumer unfriendly, strongly opposed the bill in committee and on the Senate floor.  Despite his objections the bill is now law.  The cap was removed for the sinkhole portion of Citizens’ coverage, although it remains in place for other portions of homeowners insurance policies.

Citizens’ Board of Governors approved on July 27, 2011, and sent to the Office of Insurance Regulation, an application that could make the huge rate increase possible.  The application awaiting consideration by the insurance commissioner has the potential to impact every homeowner or community association that is required to carry sinkhole coverage, or who simply want the peace of mind the coverage may bring.

Senator Fasano has called for the insurance commissioner to hold public hearings so that customers may voice their concerns with the proposed rate hike.  In addition he has asked the governor and chief financial officer to weigh in on the issue.  CFO Jeff Atwater has done so.  Additionally, Senator Fasano and the organization Policyholders of Florida are organizing rallies in Pasco, Hernando & Citrus Counties for August 16th.  It is hoped that advocates throughout the state will join the movement and make that date a day to remember.

‘If decision makers understand that these tough economic times already sap what people have in their bank accounts, then hopefully these outrageous rates will be denied,” Senator Fasano states.  “It is not the time to force people to come up with money they don’t have, or potentially lose their homes if their lender requires insurance they can’t afford.”

The next chapter will be written once the Office of Insurance Regulation decides whether to approve or deny the rate application.  Stay tuned at the story continues…

Peter Schorsch is the President of Extensive Enterprises and is the publisher of some of Florida’s most influential new media websites, including SaintPetersBlog.com, FloridaPolitics.com, ContextFlorida.com, and Sunburn, the morning read of what’s hot in Florida politics. SaintPetersBlog has for three years running been ranked by the Washington Post as the best state-based blog in Florida. In addition to his publishing efforts, Peter is a political consultant to several of the state’s largest governmental affairs and public relations firms. Peter lives in St. Petersburg with his wife, Michelle, and their daughter, Ella.