Editorial: State action against insurance company misconduct is a good start – but not enough

Last week Florida insurance regulators triumphantly announced a barrage of fines, totaling $2.1 million, against eight property-insurance carriers for violating multiple consumer-protection laws and their own policy language in the wake of Hurricanes Ian and Idalia.

The list of sins (which the companies have tacitly acknowledged by agreeing to “consent orders” that include the fines) will be familiar to many Florida property owners who have filed claims in the last decade or so: Failing to approve or deny claims within the 90 days allowed by law, using unauthorized adjusters to estimate damages and failing to provide customers with proper disclosure of their rights and the factors that went into claims decisions.

It certainly looks impressive, particularly when backed by Insurance Commissioner Michael Yaworsky’s assertion that state regulators have eyes on insurance companies at all times — and will be watching during this year’s storm season, which is expected to intensify in the coming months.

It’s not enough

But we can’t help but wonder. Collectively, $2.1 million in fines sounds pretty hefty. But broken down among eight companies, the individual fines seem small enough to be rolled into the cost of doing business.

It’s also understandable that complex financial investigations take time. But Ian (the costliest storm in state history, with $113 billion in damages) hit southwest Florida and tore across the state in September 2022. Idalia followed in August 2023, battering the Big Bend with a storm surge that crested at 12 feet. The news of these fines, coming two years after Idalia, might not mollify policyholders who saw their life’s biggest investments swept away in high winds and flooding and then waited for months, sometimes more than a year, to know what they would recover.

If anything: State figures, last updated in March, show that of 565,101 homeowners’ damage claims during Ian, 157,445 were denied — nearly 28%, and that’s before considering nearly 26,000 homeowners who were still waiting on decisions (though more than half of those open claims had received some form of payment.)

That denial rate is even worse for homeowners affected by Idalia. Of 17,005 total claims, only 7,075 have been closed after payment. Almost as many — 6,070 — have received final denials. That leaves almost 3,800 claims unresolved after two years. It’s possible that most of those delayed claims are for policyholders of the companies that were fined last week — and those customers certainly deserve resolution after waiting so long.

But have insurance regulators investigated the claims of customers who were denied any compensation at all? Certainly, there are always bogus claims filed after a big storm — but not enough to account for the denial rate, which is tracking similarly for more recent storms. In April, Yaworsky told Insurance Business magazine that many of the denials stemmed from claims that didn’t cover the homeowners’ deductibles, or ones that should have been paid by flood insurance (which far too many Floridians don’t purchase) instead of the main homeowners’ policy.

That still leaves 20-25% of claim denials attributed to other, undefined reasons. And even those denied for legally justifiable reasons — such as deductibles — could be unfairly decided if insurance companies under-evaluated the value of claims submitted.

Signs of bigger trouble

Following Hurricane Ian, the Washington Post reported on allegations that insurance companies were routinely slashing damage estimates reported by their own contracted adjusters, and included 12 cases where that seemed likely — including some where the damage estimates were lowered enough to deny policy holders any compensation at all. In May, testimony to a subcommittee of the Senate Homeland Security and Governmental Affairs Committee featured several adjusters who said their damage estimates were routinely whittled down before claims were paid, often with no additional investigation by the insurance company.

Florida’s Office of Insurance Regulation may well be investigating those claims of unfair denials. If not, it certainly should.

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The state Legislature also has a role to play – one it’s failed over multiple special sessions over the last few years. It’s well-known that Floridians have the highest property insurance rates in the nation. It’s also well-known that state lawmakers have cut insurance companies break after break. They’ve tweaked laws to make it harder to sue insurance companies after claims are denied, and allowed companies to write policies with deductibles too high for many homeowners to cover on their own. They’ve made billions of dollars available in cheap, state-backed “reinsurance” that helps cover catastrophic losses after a storm — which plays a role in whether insurers can meet the test of being solvent enough to pay out claims. And as revealed earlier this year, many big insurers have claimed to be losing money in Florida — while funneling vast sums of cash to out-of-state affiliates that doesn’t count in their bottom lines.

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A Miami Herald/Tampa Bay Times investigation found that the state buried a report that sounded the alarm about the extent of the money bleed. And none of these problems — which stack the deck against consumers — seem to have been thoroughly, publicly investigated.

That leads to this conclusion: Last week’s fines are certainly commendable. But Florida consumers deserve much more — starting with a full investigation of insurance-company tactics that charge property owners premiums they can barely afford, then shortchange them in their moment of greatest need. Last week’s report should be just a start of deeper investigations and – if warranted — much bigger fines, as well as compensation to Floridians who can prove they were treated unfairly.

The Orlando Sentinel Editorial Board consists of Opinion Editor Krys Fluker, Executive Editor Roger Simmons and Viewpoints Editor Jay Reddick. Contact us at insight@orlandosentinel.com.

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