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Top insurance official says sinkhole coverage needs adjusting

Proposed optional coverage will be confusing if it isn't tweaked, Kevin McCarty says.

By DAVID DeCAMP
Published December 20, 2006

Florida's top insurance regulator has signaled that the plan by Citizens Property Insurance Corp. to make sinkhole coverage optional needs a few tweaks.

Florida Insurance Commissioner Kevin McCarty, said he would prefer that homeowners be made to fill out a form to opt out of sinkhole coverage instead of the coverage being automatically left out of policies unless customers sign up for it.

"I am in some disagreement on having that automatically be dropped," McCarty said Monday night following a state hearing in New Port Richey marked by confusion and complaints by residents about policy standards. "People who are not as informed wouldn't understand what's going on."

Citizens, the state-run insurer, wants to change its standard policies to eliminate sinkhole coverage statewide starting March 1. Standard policies would cover only catastrophic collapses. Coverage for lesser damage, now part of all policies, would cost extra.

Dropping sinkhole coverage would decrease the rate by close to 58 percent in claim-prone coastal Pasco County. Rates would drop 45 percent in coastal Hernando. North Pinellas also would see some decrease. Areas with few claims would get little or no rate relief.

Sinkhole claims have driven up rates in those areas, particularly in Pasco, which had two-thirds of Citizens' 600-plus sinkhole claims last year.

McCarty also said he is concerned with Citizens' definition of a catastrophic collapse. Under the insurer's proposal, homes would have to drop at least 5 feet within seven days to be covered. McCarty would simply require that the house be condemned.

Backlash over that limit prompted state Sen. Mike Fasano and state Rep. John Legg to remove the 5-feet-in-seven-days standard from a bill they are drafting. It would allow private insurers to make sinkhole coverage optional, too. The lawmakers' bill also would require only that a home be condemned.

Citizens officials say they were looking for a standard that eliminates claims for cracking and settling that don't involve true sinkhole activity.

McCarty also said regulators will review Citizens' proposed rate decreases. Pasco County officials and their actuary, Allan Schwartz of New Jersey, said the rate cuts should be 20 to 45 percent more, depending on policy types.

A decision is expected in January, McCarty said, although Citizens officials asked for approval by the end of December. The state is allowing comment and evidence to be submitted until Dec. 28.

David DeCamp can be reached at 727 869-6232 or ddecamp@sptimes.com.

[Last modified December 20, 2006, 06:15:05]