TAMPA — After unsuccessfully fighting a property insurance bill that led state-run Citizens Property Insurance to propose massive increases for its sinkhole policies, state Sen. Mike Fasano received a standing ovation and thunderous applause at a hearing Tuesday.
Nearly 200 property owners turned out for the insurance rate hearing, many of them traveling to the Tampa Convention Center in a three-bus caravan coordinated by Fasano, a New Port Richey Republican.
"I'm encouraged that so many people were able to come tonight," Fasano told state insurance regulators, who hosted the hearing. "They are the human face of this very real crisis."
Citizens originally asked regulators for a rate increase that would have bumped up sinkhole premiums in some parts of the state by more than $4,400 a year. A proposal revised since then would still raise premiums by more than $1,000 in some areas.
Dozens of policyholders from throughout the Tampa Bay area told tales of trying to make ends meet in a tough economy and fearing much larger property insurance bills.
"We have widows, we have retirees, we have people who are unemployed, who are holding on to their homes as a last resort. Homes used to be the American dream. Now it's the American nightmare," said Rose Rocco, a former Hernando County commissioner and a Citizens policyholder.
Bernadette Nata from Spring Hill, who is facing a foreclosure and whose hours were cut at her McDonald's job to just nine a week, fought tears as she spoke.
"It's unconscionable to even think about doing this to the average Floridian. It's cruel," she said.
Two lawmakers who voted in favor of the insurance overhaul bill — Reps. Richard Corcoran, R-New Port Richey, and Jimmie Smith, R-Inverness — spoke against the rate hikes Tuesday.
But some speakers blamed lawmakers for passing a bill they didn't fully understand. Others put the burden on mismanagement by Citizens, bad growth management laws and water policies that permit excessive pumping that can cause sinkholes.
More than 94,400 property owners in Hillsborough, Pinellas, Pasco and Hernando counties have sinkhole insurance through Citizens. In July, the company proposed increasing policy premiums by an average of 429 percent statewide and more than 2,000 percent in some parts of the Tampa Bay area. Company officials say the boost is necessary because fraud and frivolous claims pushed it to the point where current premiums can't cover payouts.
All insurance policies provide coverage for catastrophic cases when the earth collapses and takes a structure with it. That represents about 1 percent of sinkhole claims. But comprehensive sinkhole coverage is optional.
Citizens officials say the company received 1,400 new sinkhole claims statewide in the first six months of 2011, twice as many as the first six months of 2010.
Last year, the company collected $32 million in sinkhole premiums, but paid out nearly $250 million in claims.
It doesn't take a technical analysis to conclude those numbers pose a financial strain for the company, said Sharon Binnum, chief financial officer of Citizens.
St. Petersburg investor Dan Harvey defended Citizens, saying a cottage industry has sprung up around frivolous sinkhole claims.
"Close the fraud loopholes and the premiums will come down," he said.
But Fasano blasted the company. "Citizens wants to make this insurance so unaffordable that policyholders will have to drop sinkhole insurance altogether," he said.
And that could force people whose mortgage holders require the insurance out of their homes.
"If these rates are approved, the housing industry — what's left of it in the Tampa Bay area — will be gone," Fasano said.
In response to public outcry and criticism from lawmakers and high-ranking public officials, the Citizens board voted Monday to cap this year's average rate hike at 50 percent, gradually moving to the higher rates. That would provide more time to see if the new property insurance law will reduce claims and eliminate a need for the steep increases.
Fasano, though, said even a 50 percent increase this year is too much, noting that would amount to a $1,000 increase in Pasco and $1,200 in Hernando. In the Tampa area, a 50 percent increase would be about $80 a year.
Regulators asked Citizens officials if they took into account the new property insurance law, which among other things limits coverage to primary structures and strictly defines damage caused by sinkholes, when requesting the new rates.
Citizens' executives were scolded after indicating they had no concrete data on the impact.
"Without concrete data, you're asking people in some counties to pay $5,000 more?" asked state Insurance Commissioner Kevin McCarty, eliciting applause.
McCarty said he will make a decision on the Citizens request by Monday. If approved, the new rates will go into effect Jan. 1.
Janet Zink can be reached at [email protected] or (850) 224-7263.