Sinkhole Claims Behind Rising Insurance Rates in Florida

The rising number of sinkhole insurance claims in Florida cost insurers $1.4 billion from 2006 through the first ten months of 2010, with researchers at the state’s Office of Insurance Regulation saying that figure could reach $2 billion by the end of the year.

A report compiled by the OIR surveyed claims filed with 211 insurers. For the period 2006-2010, there were 24,671 claims filed on an escalating curve of activity. In 2006 there were 2,360; 2007 – 3,842; 2008 – 4,531; 2009 – 7,244; and to date in 2010 there have been 6,694. The OIR estimates the 2010 figure is approximately three-quarters of the projected end-of-year total.

Two-thirds of these claims are tied to Hernando, Pasco, and Hillsborough counties — the so-called “Sinkhole Alley.” Numbers in Miami-Dade and Broward are rising. Other areas with high activity include Marion, Polk, Orange, Citrus, Alachua, Volusia, and Seminole.

Only about 1 percent of the claims represent catastrophic damage to the home. Most are for cracked foundations and driveways. Even in cases where no damages are paid, however, these claims are costly to the insurance companies with some required tests to the structures costing as much as $15,000. Those cases that are settled usually carry a figure in the range of $30,000 to $40,000.

The up-tick in sinkhole claims is largely responsible for spiraling insurance premiums in the state. Citizens Property Insurance, the largest property insurer in Florida, recently cited the expense of handling sinkhole claims as a major justification for a rate increase. Citizens took in $19.6 million in sinkhole coverage premiums in 2009, but paid out $97 billion in claims.