Citizens' rate cut has catch
Homeowners could lower costs, but they would have to drop sinkhole coverage.
By JAMES THORNER
Published October 27, 2006
TAMPA - It has been a while since homeowners in Pasco and Hernando counties heard any good news from the insurance front.
They got a potential bucketful on Thursday.
Citizens Property Insurance Corp. confirmed Thursday it was months from slashing average premiums for customers in Pasco and Hernando counties by half.
There's a catch: Customers will have to waive sinkhole coverage, though if the home collapses into an actual cavity in the earth, Citizens would still be on the hook for replacement costs.
If the reductions are approved by the state's Office of Insurance Regulation - a prospect Citizens rated as "highly probable" - Pasco's average homeowner premium would plunge 57 percent, from $2,505 to $1,090.
Hernando's would fall 44 percent from $1,712 to $961. The reductions would be relatively small in Pinellas, Hillsborough and Citrus, counties less stricken by sinkhole claims.
"I will personally benefit from it, but a lot of people holding mortgages will not," said Wil Nickerson, 61, a Holiday homeowner. "They will have to carry it (sinkhole coverage)" because their mortgage holder will require it.
At Citizens' monthly board of governors meeting, held Thursday in Tampa, chairman Bruce Douglas called the sinkhole exclusion a victory for homeowners and a defeat for lawyers who rack up "so-called sinkhole claims."
Insurance rate relief for Pasco and Hernando residents has topped the agenda for much of this year, including a stormy town hall meeting last spring in New Port Richey.
As the state's insurer of last resort for property owners unable to get coverage on the open market, Citizens paid about $40-million in sinkhole claims last year, almost all in Pasco.
But as Citizens vice president Paul Palumbo pointed out, Citizens has never covered a claim on a home swallowed by a sinkhole. Rather, about 90 percent of the claims are relatively minor cracks in foundations and driveways that Citizens attributes to ground settling.
Douglas suspects almost every Citizens policy holder in Pasco and Hernando will opt out of sinkhole coverage. They'll still have the chance to pay thousands more to "buy back" full coverage. The sinkhole exclusion would take affect March 1 for new policies and May 1 for renewals.
"It's optional. You make the judgment," Douglas said, adding, "I don't think we're going to have a dramatic buyback program."
For Nickerson, a real estate broker who is part of reform group Homeowners Against Citizens Florida, the change should mean his $4,900 premium with Citizens drops dramatically this year. He has no mortgage. But he said lenders might not allow people to opt out of sinkhole coverage, negating the savings.
If homeowners cannot opt out of sinkhole coverage, their rates will actually rise, according to Citizens.
For example, according to the insurer, the owner of a 1978 house in Pasco with $250,000 in replacement coverage now pays a premium of $7,019. By dropping sinkhole coverage, it would drop to $3,664. But if the homeowner was required to maintain full coverage, the bill would rise to $7,395, an increase under current rates of $376.
Pasco County has hired an attorney and actuary to see if more saving and coverage changes are possible.
Staff writer David DeCamp contributed to this report.