Sanity for sinkhole rates, but sinkhole claims still insane
Come on. Did you really think Citizens Property Insurance would get approval to raise statewide sinkhole rates an average of 447 percent? I’ll bet they didn’t think so either. So why would our state-run insurance company ask for such an increase, you may ask. Because that is what their data showed. Insurance rates = insurance costs. Citizens’ documents from its rate hearing show it paid nearly eight times more in claims than it collected in premium. It also showed that sinkhole claims this year are twice what they were last year. How are they (we) going to pay those rising costs? A little bit at a time is the answer in the hope that it will all go away.
To summarize the deep sinkhole problems of Citizens:
- Citizens paid out $250 million in sinkhole claims in 2010 and collected just $32 million in sinkhole premiums to pay those claims.
- Sinkhole claims are coming in this year at double the rate of last year, primarily because the door is closing on filing frivolous sinkhole claims for cosmetic damage so some feel inclined to get a foot in the door.
- Citizens’ board knew that a massive sinkhole increase had no way of getting approval, and they settled on phasing rates in at 50 percent of the current rate for next year, and then re-crunching the numbers to see if the sinkhole claims volume goes down with the law changes taking effect.
- Commissioner McCarty said the 50 percent cap should be 32.8 percent.
Here’s the disconnect I see: We have solid data proving how much sinkhole claims cost insurers. There is no corollary scientific study showing more actual sinkholes are occurring. All we have are more sinkhole CLAIMS – and no one wants to pay for them. We have become accustomed to government paying for all sorts of things without having the money on hand, and it continues to hold true for the government-run insurance company. Dubious sinkhole claims are those in which policyholders took claims money and did not make repairs. The majority of claimants have done that, according to county property appraisers. That is one loophole in the old sinkhole law closing with the legislative changes.
Alas, in Florida, setting insurance rates is not about math; it is about politics, as the editorial in the St. Petersburg Times noted. The editorial board declares that sinkhole rates are “settling at a sane level.” Okay, rates are sane, but sinkhole claims are insane.