For the third year in a row, Florida lawmakers have unveiled amajor property insurance bill. The 2011 bill proposes sweepingchanges to everything from sinkhole coverage to how muchpolicyholders could get paid after damages to their home.

Two previous efforts to pass comprehensive insurance measureswere vetoed by then-Gov. Charlie Crist. Even though there is now anew pro-business governor, the initial focus by the bill's mainsponsor is not on rate regulation, but on the cost driversaffecting the bottom line of insurance companies.

Sen. GarrettRichter, R-Naples, chair of the Senate Banking and InsuranceCommittee, said that includes making substantial changes to howinsurers handle sinkhole claims.

A report from Richter's own committee suggested that the recentspike in sinkhole-related claims is likely due to people seekingpayments for damages that may or may not be connected to sinkholes.That report came on the heels of a detailed data call done by theOffice of Insurance Regulation (OIR) last fall that showed thenumber of sinkhole claims in Florida had tripled since 2006.

"What has happened is we have had 'Hurricane Sinkhole,'" Richtersaid. "While it has not gotten the attention of Hurricane Charleyor Hurricane Andrew that have come through Florida in years past,Hurricane Sinkhole has come in and quadrupled claims."

Locke Burt, chairman and president of Security First InsuranceCo., told legislators in January that his company has seen sinkholeclaims grow from just four counties that make up the so-called"sinkhole alley" in west Central Florida to nearly half thecounties in the state. Burt said that his sinkhole claim count hasgone from zero in 2006 to 72 claims in 2010 at a cost of $5.5million. Security First covers about 110,000 homeowners andcondominium owners. Burt went so far as to say that sinkholes havegone from a contained issue in a handful of counties to a"statewide pandemic."

Bill Will FaceOpposition
The major bill, SB 408, unveiled by Richter would require that asinkhole claim be filed within two years of the incident thatcaused the damage.The legislation would change the definition ofwhat damage is covered by sinkhole coverage and allow insurers toapply a deductible to policyholders to cover the cost ofinvestigating the claim. The legislation would also requirehomeowners to start repairs within 90 days of the confirmation of aclaim.

The legislation changes the use of neutral evaluators of theproperty and the legal weight that must be given to reports fromthe evaluators.

Richter's bill is likely to trigger some significant oppositionfrom attorneys and public adjusters. The group that representspublic adjusters has already sharply criticized the sinkhole reportfrom Richter's committee as giving "weight to insurance companyinterests at the expense of Florida homeowners."

David Beasley, president of the Florida Association of PublicInsurance Adjusters, said the Senate is relying on "unprovenallegations" that the increase in sinkhole claims are somehowrelated to fraud. Beasley noted that the OIR data call said itfound very few claims that were fraudulent.

"Putting the interests of insurance companies ahead of those ofthe Florida residents they are supposed to protect isunconscionable," Beasley said.

This major property insurance legislation, however, does notinclude some of the flash points that prompted Crist's veto lastyear. The 2010 bill included a provision that would have allowedinsurers to raise rates up to 10 percent to cover the costs ofinflation and reinsurance.

The primary rate-related measures in this year's bill includelanguage that would make it easier for insurers to ask for ratehikes to pay for reinsurance costs. Insurers could also raise ratesif they can show that they are losing money on wind mitigationdiscounts. Another provision says state regulators cannot limitagent commissions when reviewing rates.

The 113-page bill does include several items initially proposedlast year, including limits on what insurers must initially pay torepair a home or replace personal items that have been damaged.Insurers want the law changed to require that consumers must spendmoney on repairs or on  replacing damaged items beforethey are reimbursed for the full amount.

The measure would also allow insurers to cancel or non-renewpolicies with only 45 days notice if regulators determine thecancellation "is necessary to protect the best interests of thepublic or policyholders." Lastly, the bill places limits on publicadjusters and puts a three-year limit on when claims from ahurricane can be filed.

The senator says his top priority this year is to pass propertyinsurance legislation. However, he cautioned that the final billcould look very different by early May when lawmakers wrap up theirwork. "Right now the bill is a work in progress. It's like changinga tire on a moving car," he said.

Traditionally, insurance bills are among the last approved bystate lawmakers. Richter unveiled the bill two months before thestart of the session in order to get the measure debated and votedon much earlier this year.

Rates and Citizens Likely to GetAttention
While Richter is concentrating his focus on cost drivers, that doesnot mean there won't be other significant property insurancereforms during the annual session that starts March 8. It is likelythat there will be attempts by other lawmakers to change Floridalaw regarding insurance rates, as well as an effort to make majorchanges to Citizens Property Insurance Corp., the state-createdcarrier that is now the largest property insurance company inFlorida.

Gov. Rick Scott has vowed that he will tackle property insurancereforms in the coming year, but he has yet to unveil anysubstantive plans. Scott said during his campaign that he wouldlike to eliminate the power that both Citizens and the FloridaHurricane Catastrophe Fund have to charge assessments on mostinsurance bills. "We have got to deal with property insurance, soI'm going to put a lot of effort into that so that Citizens becomesthe insurer of last resort as quickly as possible," Scott saidright before he was sworn in as governor.

"We might have a hurricane next year."

Calls to reform Citizens have accelerated in the last few monthsin the wake of new projections showing that the carrier continuesto add policyholders even though there has not been a hurricane infive years.

One of the ideas suggested is raising the 10 percent annuallimit on rate hikes for Citizens' policyholders. Other suggestionsinclude limiting the ability of Citizens to sell multi-perilpolicies and making it harder for homeowners to switch to Citizensfrom private carriers.

"I do forecast in the coming session that there will be policiesput forward that try to put forward a greater environment for amarketplace to be more vibrant to the extent that Citizens, ourinsurer of last resort, is not the recipient of so many policies,''said new Chief Financial Officer Jeff Atwater.