A panel discussion on sinkholes held last week focused first on the role of Citizens Property Insurance Corp.
Some 100 people at the forum, put on by Council of Neighborhood Associations civic group, heard an often-contentious debate between state Sen. Mike Fasano, R-New Port Richey, and Barry Scarr, president of Scarr Insurance Group.
“Six years we’ve been rolling the dice,” Scarr said, referring to the time since the last hurricane menaced Florida.
Fasano dismissed such talk as “scare tactics.”
Residents continue to pay assessments on auto insurance policies to help pay off damage from previous storms, Scarr said a major storm strikes the state in the future, Citizens Property could charge assessments up to 45 percent of the regular premiums on a policy to help pay claims, he emphasized.
Citizens was able to sell some bonds to raise more cash, but the state-backed insurer could not handle much more than $20 billion in claims from a major disaster, Scarr said.
Citizens, Scarr said, has “become the carrier of first resort instead of carrier of last resort” and the largest insurer in Florida. State officials need to encourage more private insurance firms to enter the Florida property insurance market, he said.
Private property insurers are unable to compete now with Citizens because it has a cap on its annual rate increases the Legislature imposed, Scarr said.
While no hurricane has struck the state for years, homeowner insurance premiums have not gone down, Fasano said in response.
Fasano said the insurance industry has been raising the threat of a destructive 100-year storm and the claims it would generate to justify raising rates. The chance of such a storm — one so powerful it should occur, on average, only once a century — is less than half of one percent, he said.
At the same time, three-fourths of Citizens policyholders opted out of additional sinkhole coverage in recent years to significantly lower premiums. The main policy still covers catastrophic ground collapse that makes a home unlivable.
Yet private insurers aren’t knocking at the door of Pasco homeowners and offering them property coverage, Fasano said.
“They’re not coming back,” Fasano said about private insurers in the Pasco market. “They lied to us. They have no intention of coming back.”
Fasano also criticized Citizens for high estimates of the replacement value of a house if destroyed by a storm. Lawmakers this year added options to challenge those Citizens’ estimates.
“Don’t you wish you could sell your home” for the replacement value that Citizens calculates, Fasano asked. “It’s absurd.”
Now Citizens executives are reducing coverage on carports, screened porches and other structures attached to a home, Fasano said. Citizens is renewing attempts for dual rates, charging about 31 percent higher for any new policies it writes.
Scarr said Citizens either needs to raise rates or reduce its exposure to disaster claims, Scarr said. Lawmakers defeated a proposal last year for a 25 percent increase in Citizens rates, he noted.
Citizens could fall short by 40 percent to 50 percent of being able to handle all its risks, Scarr said. He’s confident changes could bring private firms back into the insurance market.
One sinkhole claim in a neighborhood can lower the value of all homes in an area, Scarr observed. It’s “like putting a big red X” on a house, he said about sinkhole claims.
“We’re the guys caught in the middle,” James J. Collier, president of Certified Foundations, a contracting firm that specializes in sinkhole repairs, said.
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