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.  

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