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Front Page » Business & Finance » Fixing Florida property insurance mess a slow process

Fixing Florida property insurance mess a slow process

Written by on January 18, 2023
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Fixing Florida property insurance mess a slow process

After the two bills aimed at fixing the property insurance crisis in Florida, experts are hopeful the new measures are a step in the right direction, but the effects will still take time.  

Florida Governor Ron DeSantis signed senate bill 4-A and senate bill 2-A on the special session last December. The first bill provides $750 million for disaster relief to Floridians affected by Hurricane Ian and Hurricane Nicole in the form of tax reliefs. The second bill is a property insurance reform that is aimed at stabilizing the market by increasing competition and strengthening consumer protections.  

SB 2-A eliminates one-way attorney fees for property insurance claims, in efforts to disincentivize lawsuits and reduce excessive litigation, which is meant to reduce premiums for homeowners. The bill would also enhance the Office of Insurance Regulation’s ability to conduct market examinations of property insurers to prevent abuse of the appraisal process. It would reduce timeless for insurers to get payments to policyholders.  

The main issue responsible for the Florida insurance industry long being in a parlous state is excessive litigation, said Jerry Theodorou, director of Finance, Insurance and Trade Policy for the R Street Institute. “They are good measures,” he said of the bills, “mainly because they came at the abuses of the legal system, which has been responsible for the artificial inflation of claims, which has led to the increases in premium.” 

Unfortunately, these measures will take time to go through the system, he added, “and there is opposition from some of the law firms and the contractors that have benefited from taking advantage of those things, but in the long run, that’s what needed to be done.” 

The Florida home insurance market had a difficult 2022, said Jennifer Gimbel, home insurance expert at Policygenius. Florida filed more than 535,000 claims since Hurricane Ian, totaling an estimated $5.9 billion in insured losses, as of last October. The average cost of property insurance rose 39% higher than the national average, said a Policygenius analysis, which predicted the market to continue to rise.  

“Expensive natural disasters, fraudulent roof damage lawsuits, and company bankruptcies have led the market to the brink of collapse,” said Ms. Gimbel. “Homeowners are dealing with record-high insurance rates and limited insurance options outside of Citizens Property Insurance.” 

Less choice for Florida homeowners will push them to seek coverage from Citizens Property Insurance Corporation, the state-ran insurance company, Florida’s source of last-resort insurance. “So, the market is going to be under pressure,” said Mr. Theodorou. 

Another factor contributing to the pressure is reinsurance, he said. Reinsurance is the insurance that insurance companies buy “to protect their balance sheets. And it has gotten a lot more expensive, so those costs are going to be passed down to the policyholder, and some of the smaller insurance companies may not be able to afford to buy adequate insurance, setting some of them to go out of business. So, it’s a shrinking market.” 

Since 2020, 15 insurance companies declared insolvency in Florida, including FedNat Insurance, Southern Fidelity, Lighthouse, Avatar Property and Casuality, St. Johns and Weston Property and Casuality. Florida filed 75% of all the property claims lawsuits of the country in the last two years, according to the Insurance Information Institute.  

Fortunately, continued Mr. Theodorou, Citizens Insurance is in good shape, with their expense ratio — the total expenses of a company divided by the premiums — at about 14% or 15%, compared to other insurance companies, whose expense ratio is at an average of 30%. 

“Because insurance companies [need to] protect their balance sheet, they limit the amount of what they can lose in one event,” he said. “If another Hurricane Ian hits, it will mean that more of those small companies will fail.” 

In an analysis of Florida-only companies, Mr. Theodorou did, they retain only about 35% of the coverage risk and 65% is given to reinsurance companies. “So, if the price of reinsurance go up 25% or 35%, it makes it very expensive for them and it strains their financials. If they’re hit by another massive hurricane, it could mean an existential threat of going out of business.” 

Nonetheless, Florida homeowners are not likely to see a decrease in home insurance rates yet this year, said Ms. Gimbel, but due to the new laws put in effect late last year, “we could start seeing more insurance companies entering the market.” 

Another draw for insurance companies to return to Florida is the newly created Florida Optional Reinsurance Assistance Program — she added — which established a $1 billion fund to bail out insurers after a major hurricane or natural disaster.  

“The more home insurance companies willing to write policies in the state, the more likely homeowners will be able to find a policy with competitive rates and coverages and stop having to rely on Citizens,” she said. 

Previously, the Florida legislation passed SB 2-D in May, with $2 billion in reinsurance relief, which required insurance companies to file a supplemental rate filing once enrolled in the program to provide relief to policyholders. It prohibited insurance companies from denying coverage based on the age of a roof if the roof is less than 15 years old or if the roof is determined to have at least five years of useful life remaining, according to Florida legislation. It also required companies to provide reasonable explanation if they were to deny a claim, created a new standard for application of attorney fee multipliers, and limited the assignment of attorney’s fees in cases. 

Another bill passed in May was HB 7065, aimed at the insurance assignment agreements, setting “requirements for the execution, validity and effect of such agreements, and creating a formula that will determine which party, if any, receives an award of attorney fees should litigation related to an assignment agreement result in a judgment,” according to a press release by the state. 

The new series of laws also require Citizens policyholders who qualify for a private policy to drop the Citizens policy and go with a private insurer. “So, in essence,” said Ms. Gimbel, “homeowners could be forced to purchase a more expensive private policy this year, and for homeowners who stay with Citizens, they will be required to purchase flood insurance, in addition to their home insurance policy, regardless of their home’s flood risk. This requirement will be phased in over the next four years, starting April.” 

6 Responses to Fixing Florida property insurance mess a slow process

  1. Jon

    January 19, 2023 at 11:13 pm

    It seems to me that this legislation does NOTHING for the homeowners who are facing extraordinary increases in their insurance premiums and does EVERYTHING to ensure that The insurers reap all of the benefits- including a 2 billion dollar slush fund. Perhaps the insurance companies should be forced to put the homeowners interests before their own profits.

  2. Nancy

    January 20, 2023 at 1:26 am

    Can I retain my flood insurance paying for it, and dropping the home insurance. I might not be able to pay the homeowners insurance.

  3. FL Scot

    January 20, 2023 at 10:02 am

    Para.3: “Disincentivizing” trial attorneys and property insurance law suits (while forcing arbitration as remedy of last resort) somehow “strengthens consumer protections”? Monica Correa seems to have drunk the GOP ANTI consumer koolaid.

    Certainly nixxing “assignment” is helpful; too many property owners take the easy (and to insurers the costly) way out. “Assignment” has some onerous potentials for property owners that could be hidden in small print. Best to fully can Assignment!

    Long Florida history, however, evidences strong need for property owners to be able to sue insurers for nefarious deeds and mis-deeds. There are instances where the only recourse to owner-insurer disagreements for the owner to receive equitable remedy was to bring the issue to court. For the Legislature, further, to deny a plaintiff compensatory fees from the sued insurance firm (if the firm is successfully sued) smacks of the English Star Chamber and Chancery of the 1400-1600s policy. Put this policy next to the GOP Legislature requirements set up against Felons (ostensibly to deny them enfranchisement) who have “done their time” per Florida Constitution and see the disingenuous picture: felons pay all monetary compensatory expenses beyond incarceration, successfully sued insurance companies are not required to pay real financial expenses borne by the successful Plaintiff.

    In short, the Florida GOP Legislature has protected insurers at Florida citizen’s expense and try to call it a real working remedy.

  4. J Santini

    February 3, 2023 at 11:22 am

    This latest bill is not to fix the insurance problems. Now the insurance companies can denied covered losses without the fear of homeowner coming back with legal actions. The trial attorneys need it control as well as the AOB and contractors but since most politicians are attorneys, they passed a bill to emboldens the insurance companies, somewhat affects some attorneys and ties the hands of the homeowner. And no relief on site as to when the premiums will be lowered. It’s going to be a bonanza for the insurance companies.

  5. TJ

    February 18, 2023 at 11:15 pm

    “… increasing competition and strengthening consumer protections” like making it harder to sue deadbeat insurors. These are the kind of illusory “solutions” offered by the GQP, who are wholly owned by the money boys. But you keep electing them, Florida, so enjoy.

  6. Jill Clarke

    February 23, 2023 at 4:21 am

    SB 2-A eliminates one-way attorney fees for property insurance claims, in efforts to disincentivize lawsuits and reduce excessive litigation, which is meant to reduce premiums for homeowners.

    It does not promise a reduction.

    It does make the homeowner responsible for legal cost even when the insurance is at fault.

    It makes insurance able to avoid repair by outspending you in legal cost. If you need 10K in repairs and the attorney fees are 10K you get nothing even when the Insurance Company loses in court.

    DeSantis only protected business and insurance companies. Tax incentives and trickle down savings are garbage. ONCE AGAIN HIS RICH BUDDIES WIN.

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