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McCarty says he’ll consider fraud prevention while weighing Citizens rate filing

Posted Aug 2, 2011 by Catherine Whittenburg, Tallahassee bureau

Updated Aug 2, 2011 at 10:56 AM

State Insurance Commissioner Kevin McCarty intimated today that he may not approve a request by Citizens Property Insurance to raise rates immediately for optional sinkhole insurance by more than 400 percent statewide, since the request does not take into account anticipated impacts of a new anti-insurance fraud law.

The legislation passed this spring that enabled Citizens to request an actuarially sound rate for optional sinkhole coverage also included numerous measures aimed at combating sinkhole insurance fraud, which insurers have said is a major cost driver.

During this morning’s Cabinet meeting, state Chief Financial Officer Jeff Atwater asked McCarty if the Citizens board had considered the impacts of the anti-fraud provisions when it decided to jack up its sinkhole coverage rates—and if not, whether the insurer legally could have done so.

McCarty said he has not yet seen the actual rate filing by Citizens, but that it appears the insurer did not take into account the legislation as it could have. McCarty said he would be “vigilant” in doing so himself, noting the option of phasing in a rate increase rather than applying it all at once.

The commissioner said there is a “pent-up” need for higher sinkhole insurance rates, and that by law, McCarty cannot reject a rate filing that is proven to be actuarily sound. He expects a significant rate hike would be approved, he said.

But McCarty does have some authority, he said, to take into account “intervening events,” such as passage of the anti-fraud legislation and its predicted impacts.

McCarty said he has not yet decided whether to grant a request by Sen. Mike Fasano to hold statewide hearings on the rate request. Fasano asked Atwater yesterday to stand with him against the rate filing, while his Pasco County colleague, Rep. John Legg, asked McCarty yesterday to consider the anti-fraud potential impacts of SB 408 while weighing Citizens’ request.