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

Two previous efforts to pass comprehensive insurance measures were vetoed by then-Gov. Charlie Crist. Even though there is now a new pro-business governor, the initial focus by the bill's main sponsor is not on rate regulation, but on the cost drivers affecting the bottom line of insurance companies.

Sen. Garrett Richter, R-Naples, chair of the Senate Banking and Insurance Committee, said that includes making substantial changes to how insurers handle sinkhole claims.

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

"What has happened is we have had 'Hurricane Sinkhole,'" Richter said. "While it has not gotten the attention of Hurricane Charley or 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 Insurance Co., told legislators in January that his company has seen sinkhole claims grow from just four counties that make up the so-called "sinkhole alley" in west Central Florida to nearly half the counties in the state. Burt said that his sinkhole claim count has gone from zero in 2006 to 72 claims in 2010 at a cost of $5.5 million. Security First covers about 110,000 homeowners and condominium owners. Burt went so far as to say that sinkholes have gone from a contained issue in a handful of counties to a "statewide pandemic."

Bill Will Face Opposition
The major bill, SB 408, unveiled by Richter would require that a sinkhole claim be filed within two years of the incident that caused the damage.The legislation would change the definition of what damage is covered by sinkhole coverage and allow insurers to apply a deductible to policyholders to cover the cost of investigating the claim. The legislation would also require homeowners to start repairs within 90 days of the confirmation of a claim.

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

Richter's bill is likely to trigger some significant opposition from attorneys and public adjusters. The group that represents public adjusters has already sharply criticized the sinkhole report from Richter's committee as giving "weight to insurance company interests at the expense of Florida homeowners."

David Beasley, president of the Florida Association of Public Insurance Adjusters, said the Senate is relying on "unproven allegations" that the increase in sinkhole claims are somehow related to fraud. Beasley noted that the OIR data call said it found very few claims that were fraudulent.

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

This major property insurance legislation, however, does not include some of the flash points that prompted Crist's veto last year. The 2010 bill included a provision that would have allowed insurers to raise rates up to 10 percent to cover the costs of inflation and reinsurance.

The primary rate-related measures in this year's bill include language that would make it easier for insurers to ask for rate hikes to pay for reinsurance costs. Insurers could also raise rates if they can show that they are losing money on wind mitigation discounts. Another provision says state regulators cannot limit agent commissions when reviewing rates.

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

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

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

Traditionally, insurance bills are among the last approved by state lawmakers. Richter unveiled the bill two months before the start of the session in order to get the measure debated and voted on much earlier this year.

Rates and Citizens Likely to Get Attention
While Richter is concentrating his focus on cost drivers, that does not mean there won't be other significant property insurance reforms during the annual session that starts March 8. It is likely that there will be attempts by other lawmakers to change Florida law regarding insurance rates, as well as an effort to make major changes to Citizens Property Insurance Corp., the state-created carrier that is now the largest property insurance company in Florida.

Gov. Rick Scott has vowed that he will tackle property insurance reforms in the coming year, but he has yet to unveil any substantive plans. Scott said during his campaign that he would like to eliminate the power that both Citizens and the Florida Hurricane Catastrophe Fund have to charge assessments on most insurance bills. "We have got to deal with property insurance, so I'm going to put a lot of effort into that so that Citizens becomes the insurer of last resort as quickly as possible," Scott said right before he was sworn in as governor.

"We might have a hurricane next year."

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

One of the ideas suggested is raising the 10 percent annual limit on rate hikes for Citizens' policyholders. Other suggestions include limiting the ability of Citizens to sell multi-peril policies and making it harder for homeowners to switch to Citizens from private carriers.

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