TALLAHASSEE – The economy is making it tough for many home owners to pay their mortgage. Now some may have even more difficulty paying for insurance. Insurance companies want to increase rates for sink hole coverage by more than 400 percent.
Some areas of the state would be hit by 2,000 percent higher rates.
The insurers board approved the increase Wednesday, and now it will go before Office of Insurance Regulation.
“If (homeowners) can’t afford that, they may have to move out,” said State Senator Mike Fasano.
The New Port Richey Republican warned of dire consequences when the Legislature passed what’s known as Senate Bill 408. It allowed the insurance company will increase the rates it charges for sinkhole coverage by as much as necessary.
In the past, the rate increases were limited to 10 percent per year. Fasano said his worst fears have been realized.
“The insurance companies will price coverage so high and make it so difficult to get, that homeowners wont have access to it and won’t be able to afford to pay for it,” Fasano said.
But insurance companies insist the rate increase is necessary.
“We’re getting killed by sinkhole claims,” said company spokeswoman Christine Ashburn. She said last year they took in $32 million worth of sink hole premiums but paid out nearly $250 million dollars in claims.
According to Port Richey Representative John Legg, the rate increases are necessary to keep insurance companies solvent.
“With a provision that allows for the sinkhole premiums to pay for themselves, the rest of us who don’t have sinkhole coverage are actually subsidizing those activities,” he said.
Legg also maintains that policy holders have abused the system.
“It’s dramatically driven by what I would say are questionable claims,” he said.
According to Legg, far too many people file claims for minor cosmetic damage without actually having a sinkhole. Fasano concedes there may be some fraud, but not enough he said to justify a massive rate increase.
“Common sense is that regardless of how much fraud is involved, you don’t hit the little guy and gal who can least afford it with a 2,000 percent increase,” Fasano said.
If rates do go up as requested, the state-wide average increase would 429 percent. People living in the Tampa would get socked with a 1,304 percent increase, and Hillsborough county’s rates would jump by 2,239 percent.
Oddly, in Pasco County, considered one of the most active sinkhole areas of the state, rates would jump by a modest 203 percent. Senator Fasano is urging policy holders to e-mail the Office of Insurance Regulation at email@example.com and put “Insurance Rate Hike” in the subject line.