However, because the property insurance bill the Legislature sent to the governor includes a change in the claims-paying procedure, we have some explaining to do over so-called "holdbacks" related to property claims.

Among the many provisions included in SB 2044 is a measure to allow insurers to first pay actual cash value (ACV) for property claims and then pay the remainder of the claim once a written contract for repairs is obtained. Currently, there is no such holdback.

If this provision becomes law, insurers will first pay homeowners for the depreciated value of their structural damage, in addition to any repair costs needed to secure the home to prevent further damages. The remainder of the claim is paid once the homeowner turns in a signed contract for the repair work. A few important points about this change:

o There is no holdback for a total loss. Replacement cost value (RCV) is paid in full if the property is destroyed, in keeping with Florida's Valued Policy Law.

o The change does not apply to contents, only the structure. Loss of personal possessions will be paid at RCV, providing the homeowner has purchased that type of coverage.

Proponents of making claims payments in stages for dwelling losses say it encourages rebuilding and repairing and prevents fraud. They also agree that it makes sense to pay for losses to contents upfront because many people would not otherwise have the money needed to replace a TV or furniture.

Opponents contend that it delays the claims process and allows insurance companies to "play the float" with policyholders' money. Critics also call it a bait-and-switch to charge for replacement cost policies, and then hold back payment at the time of the claim. This argument is not valid.

We need to counter this criticism by stating that it makes little sense for someone to buy a replacement cost policy if he has no intention to actually replace or repair his home. We also need to make it clear that personal possessions are exempt from the change and explain that only a signed contract is needed for additional money to come from the insurer. The end goal is to better match the claim payment to the costs incurred.

Florida statute 627.7011 (3) currently requires insurers to pay full replacement cost whether or not the property owner actually repairs the dwelling or replaces the contents. Although the insurance company does not force a homeowner to repair or rebuild, the mortgage company typically does. Insurance is the collateral to repay the home loan. With nearly half of mortgaged properties in Florida underwater, according to CoreLogic, Inc., banks will want their investment protected.

Naturally, there will be people who view a change in RCV payments as a take away. However, for all practical purposes it is merely, well, practical! It has the identical outcome as that which currently exists — making people whole after they have suffered a loss.

We should consider this an opportunity to engage in dialogue with policyholders about the concept of indemnity. To indemnify means to pay no more than what it costs to return a damaged property to its pre-loss condition. It is not about improving one's financial condition. It is about returning policyholders to their pre-loss state. Paying what you owe is a positive message, despite the efforts of industry critics who attempt to twist it.

Experiencing a significant property loss is not like winning the lottery. Insurance companies will compensate policyholders for their loss, as they always have. However, insureds are not entitled to profit from the loss. Paying replacement costs as expenses are incurred keeps the recovery in motion. That's a message we must deliver.

Lynne McChristian is the Florida representative for the Insurance Information Institute. She may be contacted at 813-480-6446, [email protected]. Also, see www.InsuringFlorida.org for her insurance blog, "Straight Talk."