The quickest way to squash the anemic economic recovery in Florida is for Citizens Property Insurance Corp. to approve absurd increases in premiums for sinkhole coverage. The astronomical increases in the Tampa Bay area would force some homeowners out of their homes, kill the sputtering housing market and leave many residents with several thousand dollars less to spend in local businesses struggling to survive. If the Citizens board approves these increases today as expected, the state's insurance commissioner should reject them and the Legislature should rewrite the anticonsumer legislation it passed this spring.
The proposed premium increases for sinkhole coverage may reflect some actuarial tables, but they are out of touch with reality. In Tampa, the current average sinkhole premium of $156 would jump to $3,651, or 2,240 percent. In inland Hernando County, the average premium of $1,084 would rise to $6,192, or 471 percent. In inland Pasco County, the average premium would rise only 201 percent, from $1,475 to $4,440. And those increases would come on top of increases for other coverage and hurricane coverage. It would be funny if it were not so devastating to so many Tampa Bay families.
Here is a serious question: With these kinds of Citizens insurance premiums just for sinkholes, why would anyone buy a house here?
Citizens officials say they are just trying to establish actuarially sound rates. The Legislature is responsible for adding these four words on Page 87 of a 129-page bill, right where it talks about rate increases for Citizens not exceeding 10 percent a year: except for sinkhole coverage. The defenders of this highway robbery include Republican Sens. Alan Hays of Umatilla and Mike Bennett of Bradenton, who basically say, tough. Hays said he was surprised by the proposed premium increases, "but if that's what the risks are, then that's what they need to be."
Never mind about the risks to Florida's economy by forcing such an exorbitant expense onto the backs of homeowners whose wages are stagnant and whose homes are declining in value.
To be fair, Citizens has to raise its premiums for sinkhole coverage significantly because claims have gone through the roof. Hillsborough, Pasco and Hernando accounted for two-thirds of all sinkhole claims between 2006 and 2009, and total premiums to all insurers for sinkhole coverage did not cover the losses in either Pasco or Hernando. Statewide, Citizens says it collected $32 million in sinkhole premiums last year but had losses of $245 million. That is not sustainable, but this is not a problem that happened overnight. Trying to catch up so quickly with an obscene rate increase is not the answer.
There are portions of this anticonsumer law that are more palatable and should reduce the number of dubious sinkhole claims. The new law requires homeowners to spend any sinkhole damage awards to make repairs. It also limits coverage to the primary home and excludes decks, sidewalks and driveways. But these changes will take time to make an impact.
Legislators argue that Citizens customers who can't pay the sinkhole premiums can shop for coverage with private insurers or go without. Good luck with that strategy. Private insurers are likely to seek similar increases if Citizens is successful, and some mortgage companies require sinkhole coverage. The lawmakers who keep trying to apply competition and private business models to a broken property insurance market where homeowners are required by their mortgage companies to be insured are out of touch with reality.
There is a property insurance crisis in Florida, and rates will continue to rise. But if Citizens' untenable increases in sinkhole premiums are approved, lawmakers will have created an even bigger crisis. These same lawmakers who so adamantly oppose raising taxes to pay for schools and public services will have imposed on thousands of homeowners a far larger financial burden than any tax increase imaginable.