I attended the Citizens Property Insurance rate hearing in Tampa on Tuesday. At the Convention Center, I parked next to a gaudy car wrapped in advertising for a “sinkhole specialist.” At a break in the four-hour meeting, another so-called sinkhole specialist handed me an advertising flier, touting “a one-stop shop for all your above and underground repairs.” The rate hearing was, therefore, a marketing opportunity and a reminder of the cash cow sinkholes have been. Obviously, the people who have Citizens insurance are not the only ones worried about changes in sinkhole rates and laws.

Insurance rates are based on facts. And, the facts were laid out by Citizens staffers and independent experts to verify that sinkhole claims are breaking the bank of the state-run insurer. This is the government-run insurance company, mind you, that all of us pay into whether or not we actually get coverage from it. Citizens revealed the truth about sinkhole claims – and people have decided they don’t like that truth one little bit.

More than 200 people showed up, many by bus. They got free t-shirts and ball caps from a policyholder organization that happens to be associated with trial lawyers. An actuary, economist and Citizens’ executives laid out the data, and it did not appear to faze the crowd. The bottom line is….the bottom line. All anyone wants to know is how much is this going to cost me. Here’s the thing going unsaid (until now): If the people in counties with the most sinkhole claims don’t pay the right insurance rate to pay these claims, then who should pay? That’s a rhetorical question since we’ll all pay and keep right on doing so.

Insurance rates are determined by costs, and rates should be “actuarially sound,” meaning rates reflect exposure to loss. Total premiums collected must be adequate to cover claims paid out. This is the way it works for private insurers, but not for the government-run company. Documents prepared for the rate hearing show that in 2010 Citizens paid out $250 million in claims for sinkholes and collected $32 million in sinkhole premiums. In the first six months of 2011, Citizens had 1,400 new sinkhole claims. That’s double the number from the first half of 2010. Facts be damned was the overall message from politicians and policyholders.

I talked to a few homeowners at the rate hearing (aka pep rally for politicians). One couple said their neighbors on both sides of their home had filed claims for sinkhole damage. I asked if the damage had been repaired with the claims money. They said no. My next question to them: If someone had actual structural sinkhole damage to their home, wouldn’t you think they’d repair it? The point is that people filed claims for cosmetic damage and decided they would rather use the claims money for another purpose and can live with a crack in the wall or floor. SB 408 now requires that the claims money fixes damage, rather than leaving it for the next homeowner.

Another woman told me her neighbor “cashed in on a sinkhole claim” (her words) and urged her to do the same. She said that sounded too much like fraud to her, and she declined, yet came to the rate hearing to voice concerns over such behavior. Most of the attendees, of course, wanted to voice dismay and concern over rising costs.

Citizens’ board has agreed to cap sinkhole rates at 50 percent of what people are paying now for comprehensive sinkhole coverage. If you are paying $900 now annually for coverage, the rate could go up to $1,400 by January 1, if it is approved by regulators. The Florida Office of Insurance Regulation has documents you can request to get more information on proposed rates. Keep in mind that coverage for catastrophic ground cover collapse is still provided in all property insurance policies. Comprehensive coverage is optional and covers the cosmetic damage. Also keep in mind that if SB 408 works as it is designed to do, then sinkhole rates are expected to drop — because rates reflect costs.