Citizens Property Insurance board members on Monday approved capping its proposed <a href="http://weblogs.sun-sentinel.com/business/realestate/housekeys/blog/2011/07/citizens_insurance_approves_ma.html"target="new">429 percent</a> rate hike for the sinkhole portion of its rates by 50 percent in the first year.
The 4 to 0 vote happened the day before regulators have scheduled a hearing to grill Citizens on its request to raise overall statewide average rates by 25 percent.
The sinkhole portion makes up a fraction of multi-peril policies, bumping up the overall rate hike needed for those policies to <a href="http://weblogs.sun-sentinel.com/business/realestate/housekeys/blog/2011/08/citizens_proposes_average_rate.html"target="new">27 percent</a>.
Sinkhole coverage does not affect renters, condo unit owners, and homeowners with multi-peril policies who choose not to purchase it. And most Citizens policyholders with sinkhole coverage will not be hit as hard as those in the Tampa area, where sinkholes are more common.
There are 84,908 policies in South Florida with sinkhole coverage, largely because it costs very little, about $3 to $20 on average. Citizens automatically adds sinkhole coverage to policies except in Pasco and Hernando counties.
Under the phased in approach, the average sinkhole premium would increase in the first year from:
$14 to $21 in coastal Broward County</strong>, $4 to $6 in Fort Lauderdale and Hollywood, and $11 to $16, in the rest of the county;
<strong>$13 to $19 in coastal Palm Beach County</strong> and from $4 to $6 in the rest of the county;
<strong>$20 to $30 in coastal Miami-Dade County</strong> and $3 to $5 in Hialeah;
<strong>$5 to $8 in coastal Volusia County</strong>, and under $4 to over $5 in Orange County.
That's a lot lower than the <a href="http://weblogs.sun-sentinel.com/business/realestate/housekeys/blog/2011/07/citizens_to_raise_sinkhole_pre.html"target="new">triple- and quadruple-digit</a> percentage increases that would have taken effect all at once without the change approved Monday.
State law caps the annual premium increase for Citizens policyholders at 10 percent, but that excludes coverage changes, surcharges and sinkhole coverage.
Citizens is requesting a statewide rate hike of 12 percent for policies that only cover windstorm damage.
A spokesman for the Policyholders of Florida Group said it has more than 200 policyholders confirmed to attend an Office of Insurance Regulation hearing in Tampa Tuesday on Citizens' request. The group noted Monday that Citizens didn't approve caps for future years.
One question regulators <a href="http://weblogs.sun-sentinel.com/business/realestate/housekeys/blog/2011/08/could_citizens_massive_rate_hi.html"target="new">are expected to ask</a> is how the proposed rates factor in provisions of a <a href="http://weblogs.sun-sentinel.com/business/realestate/housekeys/blog/2011/05/scott_signs_sweeping_home_insu.html"target="new">sweeping property insurance law</a> passed this year intended to help insurers save money.
"The potential benefits...were absolutely taken into consideration by our team," said Sharon Binnun, chief financial officer of Citizens. Without the benefits of the law, Citizens' proposed average statewide sinkhole rates would have been more than 1,000 percent instead of 428 percent, Binnun added.
Sen. Mike Fasano, R-New Port Richey, listened to the teleconferenced meeting and said after that it's good he was on mute "otherwise I would have jumped through the phone." The new law is "what has created this mess" by excluding sinkhole rates from the overall annual rate cap Citizens is subject to, he said. "This is just the preamble every policyholder, whether it be with Citizens or private companies, can expect to see over the next few years if we don't repeal" all or parts of the law.
Board members Carol Everhart and Tom Lynch recused themselves from the vote because they're insurance agents so they or their firms could benefit financially from higher rates. Chris Gardner, <a href="http://weblogs.sun-sentinel.com/business/realestate/housekeys/blog/2011/08/citizens_property_insurances_n.html"target="new">a new board member</a> who is also an insurance broker, did not abstain.
Regulators are expected to make a decision on Citizens' rates later this month. If the rate change approved is a lot different from what Citizens proposed, its board can rethink the cap for the first year.
The OIR rate hearing at 4 p.m. Tuesday can be viewed <a href="http://thefloridachannel.org"target="new">live online.</a>