Wednesday, November 10, 2010
The problem of sinkholes in Florida is increasing, both in terms of frequency and cost, according to a new report from the stateâ€™s Office of Insurance Regulation (OIR).
OIRâ€™s study puts numbers around a problem thatâ€™s been making the headlines as many property insurers in Florida have sought approval for rate increases, citing a surge in non-catastrophe losses â€“ read sinkhole claims.
So what do the numbers tell us? OIR requested information on all sinkhole claims occurring in Florida between 2006 and 2010.
It found that total sinkhole costs over the sample period amounted to approximately $1.4 billion and increased from $209 million in 2006 to $406 million in 2009.
Of the total claims reported, 66 percent are concentrated in Hernando, Pasco and Hillsborough counties â€“known sinkhole hotspots. But Miami-Dade and Broward counties â€“ where sinkholes have traditionally not been an issue â€“ have seen a 4.2 percent increase in claims so far in 2010.
A key takeaway from the OIR report is that just one percent of the claims were catastrophic ground cover collapse sinkholes, while nearly 57 percent were allocated to subsidence.
Still, insurers are paying out more than $140,000 for the average sinkhole claim, regardless of whether its due to catastrophic ground collapse or subsidence.
McChristian highlights another key finding from the report â€“Â while insurers are paying sinkhole claims,Â only 20 percent of claimants actually have repairs made:
So, 80 percent make an insurance claim for sinkhole damage, do not make repairs (because repair work is optional) and do what with the money? Some pay off their mortgage; others may just take the money and stay â€“ or take the money and run.â€
Insurers paid a total of $406 million for Florida sinkhole claims in 2009. True, that amount pales in relation to the billions paid out following a hurricane. But when insurers talk about non-catastrophe losses rising, now you know what they mean.”
We couldnâ€™t have put it any better.
Check out the I.I.I. Florida website for more on the issue of sinkholes.