September 22, 2023
Insurance: Headwinds
The average home insurance premium in Florida is $4,231. (Assuming $400,000 replacement cost value, the median value of Florida homes in 2022)

Photo: Scott Keeler/Tampa Bay Times

Insurance: Headwinds
Citizens has become the largest insurer in Florida as private carriers have dropped policies.

Photo: Sarasota Herald Tribune/USA TODAY NETWORK

Insurance: Headwinds
The Legislature did away with assignment of benefits, a practice that allowed contractors to perform repairs in exchange for collecting on claims.

Photo: iStock

Legislature 2023

Insurance: Headwinds

The insurance industry notches two key wins.

While the Legislature addressed property insurance during special sessions last year, work remains as premiums continue to rise and insurers bail out. In the meantime, health care providers still struggle with rising costs, mental health coverage issues and staff shortages. Also on the agenda, there’s opportunity for rare bipartisan agreement on two key issues: Resiliency and water.

Never let it be said the Florida property insurance industry — as the adage goes — lets a serious crisis go to waste. Against a crisis backdrop in 2022 of six insurers failing, catastrophic losses from Hurricanes Ian and Nicole, homeowner premiums triple the national average and policy counts soaring state-backed Citizens Property Insurance, the industry got what it wanted from a special legislative session in December.

That was the second special session on property insurance in 2022. The first was in May after the Legislature passed no reforms during the regular session. There likely is more action to come in the 2023 session starting March 7.

Lawmakers and industry experts say the 2022 reforms will help stanch the pace of insurance company failures but will not bring down property insurance premiums any time soon.

Floridians pay an average of $4,231 for property coverage. The Florida Office of Insurance Regulation reported in July that the highest average annual premium is in Monroe County, at $6,729, followed by Miami-Dade, at $5,093; Palm Beach, $4,811; Broward, $4,802; and Martin, $4,373. The lowest is $1,438 in Sumter County.

In its first meeting of the year, the House Insurance and Banking Subcommittee made note of a post-Ian report estimating the Florida Hurricane Catastrophe Fund faces a $1.2-billion shortfall that could force it to “exercise its statutory assessment authority” — meaning it would need to issue bonds or, in essence, tax — via an assessment — other insurance policies in the state to cover its needs. The Cat Fund reimburses insurers for a portion of their catastrophic hurricane losses, helping them stay solvent during disasters.

Also, Citizens, whose rolls ballooned as private insurers dropped policies in Florida or went bust, expects to grow even more despite wanting to downsize. As of Jan. 20, Citizens was the largest property insurer in Florida, with nearly 1.2 million policies, about 15% of the market. Citizens estimates it will have 1.7 million policyholders by year’s end — more than triple its volume two years ago.

“Owing largely to the continued instability within the Florida insurance market, Citizens is expected to write more premiums in 2023 than it has in its 20-year history,” it says.

Should claims ever exceed its surplus funds, down to $4.5 billion in December, state-run Citizens would replenish its coffers with surcharges of 15% to 45% on its member policies and up to 10% on all property and casualty policies in Florida.

The Legislature’s recent changes will have no impact on claims arising from Hurricanes Ian and Nicole or any events that pre-date the reforms. Mark Friedlander, director of corporate communications at the Insurance Information Institute, says legal experts tell the institute it will take up to five years to resolve those older cases. He forecasts Ian and Nicole claims in Florida could cost insurers more than $60 billion.

Whatever the Legislature faces in 2023 on property insurance, it will do it without some key players who have resigned or will leave soon: David Altmaier as Florida commissioner of insurance regulation; Susanne Murphy, deputy commissioner of property and casualty insurance; and Barry Gilway as president, CEO and director of Citizens Property Insurance.

Insurer stability?

During the two special sessions, insurance allies persuaded the Legislature to eliminate the betes noires the industry has blamed for years for causing the twin curses of unprofitable insurers and high prices for consumers.

“This is the strongest insurance reform package we have ever seen passed in Florida,” says Friedlander. “It shows Florida’s new legislative leaders understand the enormity of the state’s property insurance crisis and are initiating decisive actions to create a path toward stability of the market.”

One-way attorney fees — a mandate that insurers pay their policyholder’s legal fees if he or she wins in court ... gone.

Assignment of benefits — where contractors do repairs in exchange for homeowners assigning them their rights to collect on claims — a practice lucrative for both contractors and attorneys ... gone.

Consumer advocates say one-way attorney fees are vital for policyholders whose insurers deny their claims, forcing disputes into court, where legal fees may be prohibitive for property owners already contending with major property damage.

But the industry and state regulators say litigation and benefits abuse drive an attorney-contractor industry that profits richly, even in years when no hurricanes batter Florida, driving up premiums.

All efforts to amend the legislation as it was proposed were rebuffed. Those included tapping into the state’s hefty reserve funds to temporarily subsidize consumers’ soaring premiums and prohibiting insurance companies that raise their rates from paying large bonuses to their executives and board members.

The latest reform also created a $1-billion taxpayer- funded reinsurance option for companies finding it difficult to buy reinsurance on the open market. That is atop $2 billion in taxpayer-funded reinsurance aid authorized in the first special session.

Reinsurers such as RenaissanceRe, owned in part by State Farm, see Florida as being at “increased risk from the impacts of climate change,” the firm’s president and CEO, Kevin O’Donnell, told shareholders in May.

Policyholder pain

In a nod to consumers, the legislation set tighter deadlines for insurers to examine damages and pay claims. But it also shortened by half the time period in which consumers can file their claims and makes it harder for them to sue an insurer that refuses to pay.

Further, policyholders in Citizens Property are now required to buy flood insurance regardless of their property’s flood risk, as soon as April, adding hundreds, in some cases thousands, of dollars in annual insurance costs.

Paul Handerhan, president of the Florida- based Federal Association for Insurance Reform, says that is a prudent idea in Florida and would cut down on disputes over whether damages were caused by flooding or by wind and rain. Citizens policyholders who can find insurance elsewhere can avoid buying flood insurance but may wind up paying higher premiums on the private market.

Friedlander predicts the huge losses from Hurricanes Ian and Nicole, rising reinsurance costs and rising costs for materials and labor to repair and rebuild will keep homeowner rates high at least through 2023. “We hope to reach a point where annual premium increases moderate and more property insurers will want to write business in Florida. A competitive market will lead to better home insurance pricing for all Floridians.”

Tags: Government/Politics & Law, Feature

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