Home > Property & Casualty > A report on the rise of sinkhole claims in Florida

A report on the rise of sinkhole claims in Florida

Insurers in Florida are requesting rate hikes, even though the state hasn’t seen a hurricane in more than five years, in part because of an increase in claims for sinkholes and other damage.

Homeowners insurance claims filing in Florida for damage caused by sinkholes have nearly quadrupled between 2006 and 2010 statewide, according to a report from the Senate Banking and Insurance Committee issued this week.

A survey of 211 private insurers by the Office of Insurance Regulation found that sinkhole claims increased from 2,360 in 2006 to 6,694 in 2010, at a total cost of $1.4 billion. State-run Citizens Property Insurance paid about $84 million for sinkhole claims in 2009 but only collected $19.6 million in sinkhole premiums.

The state of Florida has more sinkholes than any other state, with it’s natural karst topography being an important part of the aquifer system that supplies 95% of Florida’s drinking water. But geologists say there is no scientific reason driving the increase in insurance claims.

Florida’s lawmakers are considering some of these tactics to deal with the increase:

  • Creating a state-run sinkhole repair program. Instead of homeowners getting checks based on their insurance claims, their houses would be fixed. Insurance companies have said many homeowners who file sinkhole claims do not use the money to fix their houses.
  • Requiring sinkhole claims to be filed within two or three years after damage surfaces.
  • Allowing insurance companies to not renew policies with sinkhole coverage or after paying a sinkhole claim.
  • Revising state building code to require soil testing and foundation construction that would reduce sinkhole-related damage to buildings.
  • Creating cap fees for public adjusters who work with homeowners on insurance claims and make it an unfair and deceptive trade practice if public adjusters make misleading statements (some insurance companies say public adjusters as part of the reason their expenses are increasing).

(Image via American Red Cross)

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William Gallagher Associates is a leading provider of insurance brokerage, risk management and employee benefits services to firms with complex risks and dynamic needs, within industries that include technology, life sciences, financial risks, health care, renewable energy & clean technology, and environmental services. WGA has offices in Boston, MA; New York, NY; Hartford, CT; Princeton, NJ; Columbia, MD; and Atlanta, GA.

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