We’ve all heard that homeowners insurance in Florida has been largely affected by hurricane damage. Recently the spotlight has shifted away from hurricanes and on to sinkholes. Sinkhole claims have more than quadrupled in the last 6 years. Drive down any major highway in our area and you’ll see the billboards asking you to call to file a sinkhole claim.

Building in Florida almost always means settling and cracking. Foundations, driveways, and exterior walls crack from settling. These cracks have been fraudulently translated by some to be considered as sinkhole damage under the current Florida homeowners insurance policy description. There are firms that charge 20% or more of the total claim amount they are able to obtain from an insurer. An insurer will typically pay $10,000 to investigate a sinkhole claim. The average sinkhole claim for Citizens (our state insurance program) costs nearly $85,000. Citizens paid out $97 million last year in sinkhole claims and almost $2 billion to date. In 2010 Citizens averaged about 100 sinkhole claims a month and this year’s average is about 200 a month according to The Wall Street Journal Online.

Many legitimate sinkhole claims have been filed through the years, but there have been many more claims that have been solicited by public adjusters. For that reason we have seen insurance rates increase in our area to record highs. We’ve also seen reductions in sinkhole coverage in an attempt to try to avoid the solicitation of sinkhole claims. While sinkhole coverage can still be purchased, most carriers have eliminated the coverage entirely. They have replaced it with Catastrophic Ground Collapse coverage. This provides coverage for damage due to a sinkhole only if the home is condemned.

Recent legislation has attempted to address this issue as well. SB 408 was recently signed into law. You may read the entire bill or the summary here.

I will point out a few highlights here:

• The bill provides for more scrutiny in a sinkhole investigation, limits the amount of time a claim can be filed, and limits the amount of compensation that can be paid to solicitors.
• Citizens policies issued or renewed on or after January 1, 2012, which cover sinkhole loss may not include coverage for losses to appurtenant structures, sidewalks, decks, or patios that are caused by sinkhole activity.
• If the policyholder requests such testing, they must pay the insurer 50 percent of the sinkhole testing costs up to $2,500. If the requested testing confirms a sinkhole loss the insurer must reimburse the testing costs to the policyholder.
• As of January 2012 Citizens policyholders are subject to a Citizens policyholder surcharge of up to 45 percent of premium and emergency assessments.

We have recently started telling all of our Florida homeowners insurance clients to have a wind mitigation inspection completed on there home.

Florida homeowners insurance carriers are offering as much as a 40% discount on their homeowners insurance based on the credits that the roof of their home actually qualifies for. We have found homes in Central Florida that were built as early as 1970 that had straps on the trusses, which is one of the larger wind mitigation discounts available.

What we recommend is having a certified Florida home inspector or Florida licensed roofer provide a complete wind mitigation inspection. Generally costs range from $70 – $100 and the savings on your insurance can continue for years after the initial policy period.

In order to determine if your home may be eligible these discounts, have someone take a look in the attic where the roof trusses meet the exterior walls. If there is a roughly 1″ metal strap or clip that wraps over the truss and attaches to the exterior wall you might be eligible for some pretty substantial discounts on your Florida homeowners insurance policy.

Five reasons that Florida homeowners insurance is still getting more expensive
By Jeff Harrington, St Petersburg Times Staff Writer
Several factors combine to make it nearly certain that homeowners will be paying more for insurance.
Florida’s annual, high-stakes game of hurricane lotto – will we be hit by a major storm this year or not? – kicks off with the start of hurricane season today.
Florida has been spared a significant hurricane hit for five seasons, but that means little to the industry and regulatory forces that set property insurance rates.
Experts predict an active season of three to six intense storms in the Atlantic, with a 72 percent probability of at least one major hurricane making landfall on the U.S. coastline. Regardless of whether that happens, homeowners may still wind up paying more out of their pockets.
Here are five reasons to expect property insurance rates to continue trending up:
1. Natural disasters other than hurricanes hit the re­insurance market hard.Reinsurance [http://www2.iii.org/index.cfm?instanceid=98] – an added layer of coverage that property insurers buy to protect themselves from catastrophic loss – has always been a key part of the equation in determining home­owners’ rates. When companies buy reinsurance, a portion of that tab gets passed on to customers through higher rates.
Insurers have lost more than $70 billion from recent catastrophes such as tornadoes [http://www.iii.org/press_releases/deadly-weekend-tornadoes-in-joplin-missouri-and-other-midwestern-states-prompt-swift-insurer-response.html] from Alabama to Missouri, depleting the insurance and reinsurance industries of much of their stockpiled capital. As a result, some insurers have turned to Wall Street to raise money, issuing a record high level of catastrophe bonds in the first quarter of 2011.
In a recent report, ratings agency A.M. Best [http://www.ambest.com] highlighted the above-normal frequency of thunderstorms and tornadoes in predicting property insurers will face higher reinsurance costs. In an analysis last week, Reuters predicted reinsurance rates will rise [http://uk.reuters.com/article/2011/05/23/reinsurance-renewals-iduklde74j1pj20110523] up to 10 percent for contracts being renewed this summer by U.S. property insurers.
2. New hurricane model opens the door to higher rates.
Property insurers base their rate requests and estimates of potential storm damage by running various storm scenarios through hurricane models.
One widely used hurricane modeling company, Risk Management Solutions [http://www.rms.com], has revealed a new model for estimating wind damage that indicates Florida insurers are more at risk than previously thought as storms move inland.
The new model has already prompted insurance companies to consider buying additional reinsurance. With the anticipation of a busy storm season, “all the stars are aligned … forcing us to buy more reinsurance,” said John Auer, CEO of American Strategic Insurance [http://asicorp.org], a homeowners insurer based in St. Petersburg.
3. Friendly regulators and politicians.The political climate in Tallahassee is far removed from the days when former Gov. Charlie Crist demonized State Farm for threatening to pull out of Florida [http://www.tampabay.com/news/business/banking/article970945.ece] if it didn’t receive hefty rate hikes.
Florida Insurance Commissioner Kevin McCarty [http://www.floir.com/office/commissioner/index.aspx] has approved double-digit rate increases for numerous private insurers in the past two years. Gov. Rick Scott advocates higher rates for Citizens Property Insurance [http://www.tampabay.com/news/business/banking/scotts-plan-for-citizens-property-insurance-would-allow-rates-to-rise/1122890], the state-run insurer for those who cannot find coverage on the open market. Finally, thanks to the last legislative session, property insurers can more easily raise annual premiums up to 15 percent to pay for higher reinsurance.
4. Citizens Property rate hikes.Under state law, Citizens Property Insurance [http://https://www.citizensfla.com] is allowed to raise rates up to 10 percent a year. A measure that would have let Citizens escalate rates up to 25 percent annually failed in the Legislature [http://www.tampabay.com/blogs/the-buzz-florida-politics/content/citizens-property-insurance-rate-hike-bill-limbo]. Nevertheless, Citizens’ board has been on a mission to raise rates to where they are “actuarially sound” or, in other words, raise premiums up to a level where Citizens can cover damage claims from a major storm.
As the dominant insurer in Florida with about 1.3 million policyholders, Citizens sets the pace. Its rising rates would allow private insurance companies to raise rates and remain competitive.
5. Nonhurricane costs.One of the biggest drivers of rising insurance rates the past couple of years has been increased payouts for sinkhole claims [http://:].
A new Florida law [http://www.politifact.com/florida/promises/scott-o-meter/promise/625/reduce-insurance-fraud-involving-sinkholes] narrows the definition of sinkhole damage and forces homeowners to pay more of the cost of testing – both measures that should restrict future payouts. Nonetheless, some insurers say they’ve already been paying more on sinkhole claims this year while waiting for the new law, and that will likely be incorporated in rate filings.

According to the Insurance Journal:

The Florida Senate and Banking Insurance Committee recently approved a bill that would give homeowners insurers some latitude, allowing them to raise their rates without first getting approval from the state insurance department. The bill would let insurers increase their rates by a statewide average 15 percent above their current rate.

Senator Alan Hays, who sponsored the bill, said that while the latest bill is no “magic-bullet,” it would bring more latitude to the market. “This is an issue of consumer choice that hopefully leads to a more competitive market”.

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