Sinkhole Factor Adoption Will Lead To Consumer Savings
TALLAHASSEE, Fla. – The Florida Office of Insurance Regulation (Office) today adopted a "presumed factor of savings" for modifications made in SB 1980 which passed during the 2006 Legislative Session. All residential property owners in the State of Florida could potentially save up to 14.4% on the sinkhole portion of their premium for residential property policies due to changes in coverage pertaining to sinkholes. This, however, is a limited portion of the overall policy so the effects on the total premium will be less.
Savings will be most notable in much of Pasco, Citrus and Hernando Counties, which represent counties in the epicenter of sinkhole activity in the state of Florida. Policyholders in these areas could experience a 4% reduction in their overall premium. Policyholders in other areas not affected by sinkholes will only experience negligible changes to their premium.
Originally co-sponsored by Senator Fasano and Representative Legg as SB 286 and HB 217, the genesis of the sinkhole provisions were later incorporated into SB 1980, the omnibus property insurance legislation adopted by the Legislature and signed by the Governor. The Legislation reduces attorney fees and court costs associated with challenges related to sinkhole claims settlements. It will reduce costs by eliminating invalid claims, and reduce or eliminate settlement payments to circumvent litigation.
"This is a win-win situation. Not only do revisions in the law reduce court costs, but the legislation mandates these savings be passed to the policyholder," remarked Commissioner Kevin McCarty.
To determine the potential savings, the Office contracted the services of Deloitte Consulting who interviewed regulators, insurance companies, and plaintiff's attorneys knowledgeable in this area of the law. Deloitte estimated a range of savings between 4.8% and 14.4%. After conducting its own review, the Office accepted the high-end of this range -- 14.4% as the presumed factor of savings. However, the Office recommends the Legislature revisit this issue during the 2008 Legislative Session upon additional data being collected and analyzed.