TALLAHASSEE — The board that oversees Citizens Property Insurance unanimously approved massive increases to sinkhole premiums Wednesday, saying the rate hikes — which could cost policyholders thousands of extra dollars — are necessary to cover the cost of sinkhole claims.
Sinkhole premiums would rise by an average of 429 percent under the Citizens proposal, though rates would rise more than 2,000 percent in some parts of the Tampa Bay area. The rate hikes, which surfaced Monday, still must be approved by the Office of Insurance Regulation. It is expected to schedule a rate hearing in Tallahassee.
The increases are on top of a proposed 8.8 percent average increase in nonsinkhole-related coverage.
Gov. Rick Scott, who has long said "fixing" Citizens is a priority, said the numbers are "staggering" but not surprising.
"Since before I was elected, I have warned that Citizens is in need of serious attention and would soon have to face a day of reckoning. This proposal is the unfortunate result of politicians playing politics for too long by keeping rates artificially low," he said.
Citizens officials say the increases are necessary because premiums collected don't cover the cost of payouts made for claims. In 2010, the company collected $32 million in premiums but had loss-related expenses of $245 million, Citizens chief financial officer Sharon Binnun told the board.
"Our rate need for sinkhole coverage is enormous," she said. "We're optimistic that the sinkhole claims will stem losses over time and help reduce premiums."
If approved, the rate increases mean the average premium for a sinkhole policy in Tampa would increase from $156 to $3,651. In coastal Pasco County, rates would increase from $1,270 to $3,598. In coastal Hernando County, premiums would soar from $1,356 to $5,734.
Binnun said the state-run insurer is working to develop plans so policyholders can pay premiums on a semiannual or quarterly basis.
Sen. Mike Fasano, R-New Port Richey, who unsuccessfully fought 2011 legislation that allows Citizens to massively boost its sinkhole insurance premiums, is calling for statewide hearings.
"The economic impact on homeowners will be devastating," Fasano wrote in a letter to Kevin McCarty, insurance commissioner. "In light of these almost incomprehensible rate increases, I respectfully expect that all Floridians be given the chance to have their voices heard on this issue before the Office of Insurance rules on the application. Hearings held throughout the state, especially in those areas which will receive the highest rate increases, must be held before the application is given consideration."
Janet Zink can be reached at [email protected] or (850) 224-7263.