Editorial l Time to fix property insurance industry

The Florida property insurance marketplace is continuing to be in a crisis

Thirty years ago, Category 5 Hurricane Andrew tore through Florida, killing at least 26 people, destroying at least 25,000 houses and damaging at least 100,000 more. It was the second most costly hurricane in history, with $15 billion in damages. It led to major changes in Florida building codes and permanent changes in the insurance industry in the state.

Prior to Andrew, most of the property insurance in the state was written by major national insurance companies, but the cost of the hurricane led to many major insurance companies pulling out of coverage in the state. This has led to creation of a multitude of Florida-only companies that would write property insurance in the state. Some of these were called "pups" with the name of the national parent company, but without the national backing of the company. Others were Florida-only companies, and the Legislature created the state-run Citizens Insurance Company as the insurer of last resort.

Today, a majority of property insurance written in the state is written by Florida companies, including Citizens, with only a small amount written by large national companies. And these companies are raising rates by double digit amounts, changing coverages, canceling policies, and taking other steps to maintain financial solvency.

However, despite these changes, the industry is in a financial crisis, largely driven by litigation over roof replacement and other claims often tied to people who have used the assignment of benefits to exploit property insurers and policyholders alike.

For example, without a hurricane making landfall, the Florida property insurance market reported a combined $1.57 billion in underwriting losses in 2020, according to data obtained by the Tampa Bay Times

In recent years, a combination of lawyers, public adjusters, and roofing and home repair companies began targeting homeowners who suffered weather damage. Homeowners who signed over their right to make a claim, called assignment of benefits, to a third party were often promised big payouts like a new roof for only partial or little roof damage. The third party would then file the claim and deal with the roofing or home repair company. Some homeowners were offered other financial incentives to file claims.

If the insurance company denied a claim, the individual or company who had the assignment of benefits would hire a lawyer to file a lawsuit against the insurance company. One measure of how widespread this practice was is that in 2019 Florida accounted for over 76 percent of all homeowner litigation in the U.S. And these lawsuits have been profitable. One measure of this profitability is that since 2013, according to the Tampa Bay Times, $15 billion has been paid out in claims in Florida, and 71 percent went to attorney fees, 21 percent paid for insurers' defense costs and only 8 percent went to property owner for their losses.

Legislation passed last year was an effort to deal with the problem of solicitation for roofing claims, but portions of the law were struck down as inhibiting commercial speech. A different bill dealing with this and other issues regarding roof replacement is now before the legislature.

Whether this bill is a benefit to consumers is a question we cannot answer at this point, with details still being worked out in the legislature. What is without question is that there is a crisis in the home insurance market, and at least some of that crisis can be alleviated by thoughtful legislation that is fair to both homeowners and insurance companies alike.

We encourage Sen. Wilton Simpson and Rep. Ralph Massullo to work with other legislators to craft legislation that will alleviate some of the crisis now affecting the property insurance market and restore stability to this marketplace.