SunSentinel.com
by Julie Patel
March 11, 2011
A broad property insurance bill that would allow certain rate increases and change sinkhole coverage options is headed to the Budget Committee Tuesday.
A Senate subcommittee on Friday approved the bill, SB 408, unanimously after making a major change: Instead of allowing insurers to eliminate full sinkhole coverage, it would allow them to charge as much as they want for it. The Senate’s insurance committee approved the bill last month after three meetings and heated debate.
The change would address one of the biggest concerns about the bill: that it would hurt some homeowners with mortgages who are required to have sinkhole coverage. Lawmakers who did not want to propose other changes to the bill in the absence of the bill sponsor, who was at a funeral, said they plan to do so later.
Supporters of the bill, including some insurance industry representatives and legislators, said the bill will reduce skyrocketing costs for claims, some for minor damage and for damage that is never repaired. That could help lower rates, but the legislation does not require the savings to be passed to consumers.
“We think there are a lot of good provisions in this bill,” Monte Stevens, an Office of Insurance Regulation official, told legislators. “There’s no doubt we have a fragile market…Certainly there are reforms that are addressed in this bill that prevent some of the cost drivers.”
Opponents said it would hurt people with legitimate claims. Greg McKinney, a homeowner in Riverview, told legislators that he accepted his insurer’s conclusion in 2007 that he didn’t have a sinkhole, but the damage has worsened to the point that the repairs, based on the insurer’s engineering report, would now cost $210,000. His insurer has denied the claim, he said. “This is devastating to our family,” he said.
John Thompson, a Spring Hill who was dropped by State Farm in recent years, said his neighborhood has a lot of elderly and unemployed people that can’t afford allowing insurers to charge as much as they want for sinkhole coverage. “They claim to be losing money,” he said, yet “they do find the dollars to fund race cars and golf tournaments.”
The committee also removed a provision in the bill to allow insurance company executives to add information to a rate filing that is requested by regulators without having to swear to its truthfulness and accuracy. The Florida Justice Association, which represents attorneys for policyholders, pushed for the change and questioned another provision allowing insurers to added a profit margin on backup coverage costs that are passed through certain automatic rate increases allowed by state law that are capped at 10 percent.
The bill would, among other things:
Allow insurers to withhold a full payment for home insurance claims until policyholders enter into a contract for repairs and repairs are made. The provision wouldn’t apply to homes that are destroyed.
Require homeowners to file or reopen hurricane claims within three years after a storm and file or reopen sinkhole claims within two years of knowing about it, as opposed to the current deadline of five years or more.
Allow insurers to raise rates if they can show they’re losing money on discounts to policyholders who fortify their homes against hurricanes. It would give companies free rein on what they spend for advertising and agent commissions — costs that are sometimes questioned by regulators.
Require homeowners to pay part of the $9,500 average cost of testing for sinkholes if the insurer denies the claim.
Require a policyholder whose sinkhole claim is approved to enter into a contract for repairs within 90 days of approval and make the repairs within a year after entering into the contract.
Allow insurers to change parts of a policy during its term. That’s intended to help insurers avoid dropping policies before they expire. The bill would also reduce how much time policyholders have from the time their insurer warns them that they’ll be non-renewed or dropped to the time they’re dropped.
Insurance is a hot topic today in other parts of the state Capitol building. Sen. Alan Hays, R-Umatilla, will gather with groups such as The Florida Wildlife Federation, The American Consumer Institute, the Sea Turtle Conservancy, and the Tallahassee Tea Party to discuss provisions he plans to add to his bill, SB 1714, to shrink Citizens Property Insurance. The bill would, among other things, allow Citizens to raise policyholders’ premiums by up to 25 percent a year and make many policyholders ineligible for coverage. Hays wants to change the bill to bar Citizens from selling policies for newly built property in risky coastal areas.
Insurance is also on the agenda for a U.S. House subcommittee meeting today. Federal lawmakers are holding the first hearing this year on legislation to extend the National Flood Insurance Program for five years. The program, which was extended last year, will expire Sept. 30.
