Citrus County Chronicle OnLine
by Greg Hagar
June 12, 2011
Fortunately for taxpayers, Florida’s legislators made improving Florida’s insurance market a priority this legislative session by passing several important reforms.
As we all know, sinkhole insurance reform was badly needed to stop rampant fraud and abuse. Now that Gov. Rick Scott has signed Senate Bill 408 into law, Floridians will benefit from less fraud in the filing of sinkhole claims, which impact the premiums we all pay.
Addressing fraud in sinkhole claims was an important step in helping Florida’s insurance market recover. In recent years, public adjusters and attorneys have taken advantage of a loophole that allowed them to profit from fraudulent sinkhole claims similar to what they did with workers compensation claims prior to 2003.
Blatant examples of that fraud included public adjusters blanketing an area with flyers telling homeowners they could claim cracks in their driveway under their sinkhole coverage. In many of these cases, the cracks were not a result of sinkholes and research shows that only 1 percent of sinkhole claims are actually sinkholes.
Research also shows that once homeowners received claims checks from insurers many times they did nothing to fix the cracks, choosing instead to pocket the money.
It was also discovered that public adjusters failed to disclose to the homeowner that once a sinkhole claim has been made the home loses 75 percent of its value. A sinkhole claim not only affects the value of the home making the claim but also other homes in the neighborhood as well.
Unfortunately, our ailing economy only increased the incidence of this type of fraud. This left the state with no choice but to address the problem through the adoption of meaningful reforms to stabilize the property insurance market. We look forward to seeing the results of these tough-on-fraud measures and know there will be improvements, just as there were in 2003 when lawmakers cracked down on workers compensation abuse by limiting excessive lawsuits.
The property insurance bill recently signed by Gov. Scott will help jumpstart the marketplace by allowing insurers to increase their reinsurance rate from 10 to 15 percent — ensuring their ability to cover property owners’ claims in the event of catastrophic natural disasters like Hurricane Andrew or back-to-back hurricanes.
While the law is not perfect, it sends a signal to the nation that Florida is on a path to recovery, encouraging companies to return to Florida and once again start writing homeowners insurance policies.
A more favorable marketplace will increase competition, which will only benefit consumers by giving them more options and driving down premiums.
We applaud the Florida Legislature for passing reforms this year, but urge them to address the ongoing issues with Citizens Property Insurance Corp. by forcing it back into to its former status as an “insurer of last resort” instead of a subsidized, state-run company that has either driven private insurers out of Florida or, even worse, forced them into insolvency.
So until then, Florida taxpayers will continue to be on the hook for claims paid out to Citizens policyholders, and the state will continue to look for ways to plug budget shortfalls. Reforming Citizens is good for the financial health of our state, is good public policy and is just good common sense.
Greg Hagar is senior vice president of The Hagar Group, with offices in Inverness and Crystal River. He resides in Inverness.
http://www.chronicleonline.com/content/property-insurance-reform-priority-2011-legislative-session
