Florida can’t get past ‘duh’ on property insurance reform

Florida has a property insurance problem. Rates are already high and headed higher. The issue is so pressing that the governor called lawmakers back to Tallahassee for a special session that ended last Friday. There is no single solution to this complex challenge, but one vein to mine: Dig deep into why so many insurance companies have failed in Florida recently. “Well, duh,” you might say. “That’s too obvious.” Maybe so, but unfortunately on this important question, Florida hasn’t moved past “duh.”

The last hurricane hit Florida in 2018. Since then, seven property insurers have gone belly up, four of them in the last 13 months. A few others are on shaky financial footing. As required by law, the Department of Financial Services writes a report on each insurance company that fails. But as the Times’ Lawrence Mower reported, the department often doesn’t release those financial autopsies until years after the company went under. The Times asked for reports on five of the insurers that had failed since 2014. The department had finished only one. The framers crafted the U.S. Constitution in 116 days. Stephen King wrote “The Shining” in less than six weeks. Can the state not release a report about an insolvent insurance company in less than a year?

Florida Insurance Consumer Advocate Tasha Carter said last year that she wasn’t aware of the reports, and her spokesperson did not answer questions recently about whether that had changed. That’s right. The state’s insurance consumer advocate — whose website says the office is “committed to finding solutions to insurance issues facing Floridians” — hadn’t as of last year read any of the reports which could provide clues on how to carry out that mission. We’d like to think that this is just a lack of awareness, and not indifference or negligence.

This isn’t about pushing paper; the reports provide valuable insights on how to close loopholes and where the state needs to better enforce existing laws. For instance, the report on Jacksonville-based Sunshine State Insurance Company’s failure showed how the CEO received a $200,000 bonus months before the company was liquidated. Sunshine State’s parent and sister companies also took millions of dollars out of the company through written and “verbal” agreements, including $708,830 in two separate oral agreements in the 10 months before the company liquidated, the report said. Florida law requires such agreements to be in writing and pre-approved by the Office of Financial Regulation. One wonders what valuable nuggets about other failed companies are in the reports that haven’t been released.

With a deeper understanding of why insurance companies fail, lawmakers could enact better policies and insurers could avoid the pitfalls that ruined their competitors. As it stands, the failures take a bite out of our pocketbooks. Orlando-based St. Johns Insurance Company went under this year, which forced the Florida Insurance Guaranty Association to pay off the company’s outstanding claims. The 1.3% fee hits every policy sold in Florida, from homeowners’ insurance to flood and malpractice policies, the Times reported. That’s just the cost of one company going under.

There is a lot more to the property insurance crisis than reports on failed companies — rampant litigation, reinsurance costs and building requirements top many lists. But writing and distributing these reports is low-hanging fruit, low cost and easy to do. On this important issue, let’s at least get beyond “duh.” — Tampa Bay Times