Despite a reduction in the number of policies written including sinkhole coverage, the government-run insurer, Citizens Property Insurance Corporation, continues to experience losses caused by sinkhole activity. This has prompted the insurer to consider a process to require sinkhole inspections in areas of the state, primarily Hernando and Pasco counties, where most of the activity tends to occur.

Paul Palumbo, Vice President for Underwriting at Citizens, reported to the Board of Governors Tuesday that sinkhole activity continues to rank in the top three of Citizens’ non-catastrophe losses.  He noted that Florida statute allows insurers to require a sinkhole inspection as a condition for purchasing sinkhole loss coverage.  Sinkhole loss coverage was allowed to be separated out of basic homeowners’ policies following legislative changes.

Although he had no information on how many private companies offer sinkhole policies or how many companies have opted to separate sinkhole coverage from their base homeowner’s policy, Mr. Palumbo said Citizens should implement a process similar to private company policies that require inspections prior to writing for sinkholes.

He noted that the Office of Insurance Regulation this week issued a data call to commercial and residential property insurance writers to collect claims data related to sinkholes.

The data call will encompass sinkhole claims opened in Florida between 2006 and 2010 and will help the Office more clearly define the types of claims being filed, testing procedures to determine the legitimacy of claims, costs of inspections and geographic location of claims.  OIR also wants to gather information regarding legal fees and public adjuster fees associated with sinkhole claims as well as data dealing with the amount of structural loss.

The OIR then plans to compile a report based on the results to help regulators determine potential regulatory actions, and whether additional authority is needed through legislative action.

Mr. Palumbo also noted the Senate Banking and Insurance Committee has undertaken a study on sinkhole claims and those results are due next month.  He said Citizens will use all the available data from the OIR and Florida Senate study to develop changes regarding its writing of policies in sinkhole-prone areas.  Any changes will have to first be submitted to OIR for approval.