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State okay expected today

New rates must go into effect within 60 days when Citizens drops sinkhole coverage.

By DAVID DeCAMP
Published January 31, 2007


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Citizens Property Insurance Corp. customers in Hernando and Pasco counties will soon see big rate cuts if they drop the sinkhole coverage that has bedeviled their bills.

The Florida Office of Insurance Regulation is expected to announce today that it has approved Citizens' request to make the coverage optional - but with somewhat higher rate cuts and several stronger requirements than Citizens offered. New rates have to go into effect within 60 days.

Rates will drop at least 45 to 57 percent for Hernando and Pasco homeowners with wind coverage from state-run Citizens, the state's largest insurer, state Sen. Mike Fasano said.

Parts of Citrus and Hillsborough counties will have drops of at least 11 percent. Parts of Pinellas County will see a cut of at least 9 percent.

The cuts will be based on rates in effect at the end of 2006. The decreases will be on top of other potential savings from the recent legislative session, during which lawmakers beefed up the catastrophic fund and eased reinsurance costs.

Private insurers will soon be following Citizens in making sinkhole coverage optional, although it's unclear how much their rates will drop. The Legislature allowed them to make sinkhole coverage optional, while requiring insurers to cover catastrophic collapses that force a house to be condemned. The companies have to file new rates by June 1.

"The bill is certainly expected to produce savings," said spokesman Justin Glover of State Farm Florida.

Citizens customer Bill Anderson, 78, of Zephyrhills said he welcomes the shot at cutting his rates in half. He already has lowered contents coverage to reduce his premium, which is $2,100. "That's a real savings," he said. "Now, if I lived on the other side of the county, I wouldn't be so quick."

Insurers blame high sinkhole claims for costly premiums in western Pasco and Hernando and parts of Hillsborough and Pinellas. Of the 747 sinkhole claims Citizens had in 2006, 80 percent came from Pasco and Hernando. Citizens paid $38-million in losses because of sinkhole claims last year.

"Even the most skeptical, cynical person would have to say the sinkhole issue has been exploited the past few years in Pasco County," said state Rep. John Legg, R-Port Richey, referring to the critics of optional sinkhole coverage.

While the insurance lobby hailed the new law, some consumer advocates and lawyers said it unnecessarily raises risks to homeowners who drop sinkhole coverage. If they have sinkhole damage but no collapse, they will have to pay repair costs.

"That's why we're giving customers a choice," said Fasano, R-New Port Richey, who pushed the option with Legg.

Ginny Stevans, president of Having Affordable Coverage, said the group still disagrees with reducing coverage to lower bills. Another drawback, she said: Mortgageholders also must sign off.

As late as Tuesday afternoon, she and Fasano argued over it.

"It's taking away coverage," Stevans said. "It's always been a part of our insurance."

Major lending institutions including Fannie Mae and Bank of America have indicated that they will not require sinkhole coverage. But smaller community banks have expressed reluctance.

Florida regulators added other restrictions, according to an e-mail from the regulatory agency to lawmakers.

Customers will have to sign a statement to opt out of sinkhole coverage. Citizens wanted to exclude sinkhole coverage as a standard part of homeowner policies.

People who take sinkhole coverage with a 10 percent deductible will get a 10 percent discount on their premium. Citizens had said rates will increase if customers bought sinkhole coverage. However, Stevans said, the discount should be more.

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

Fast Facts:

 

Decrease in Citizens' insurance rates

Florida regulators have decided state-run Citizens Property Insurance Corp. must cut rates as part of a new option to exclude traditional sinkhole coverage. Here are the rate cuts by county for homeowners with policies including wind coverage:

Citrus

Coastal: 0.2 percent

Remainder: 11.4 percent

Hernando

Coastal: 54.3 percent

Remainder: 55.3 percent

Hillsborough

Tampa: 6.5 percent

Remainder: 10.7 percent

Pasco

Coastal: 52.8 percent

Remainder: 56.8 percent

Pinellas:

Coastal: 0.2 percent

St. Petersburg: 1.4 percent

Remainder: 9.1 percent

Source: Office of state Sen. Mike Fasano, R-New Port Richey

[Last modified January 30, 2007, 23:21:12]


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