Florida insurers get sweeteners

TALLAHASSEE – Florida property insurers are getting a host of industry sweeteners and lawsuit protections from state lawmakers desperately trying to revive a market rocked by company failures and costly hurricanes.

The Florida Legislature ended a three-day special session leaving most homeowners bearing the brunt of changes certain to bring higher insurance costs in the short-term.

Long term?

"There is hope. And a plan," said Rep. Tom Leek, R-Ormond Beach, a sponsor of legislation which restricts lawsuits against insurers, provides $1 billion in taxpayer money for industry reinsurance and likely forces thousands of Floridians to abandon lower-cost coverage through state-backed Citizens Property Insurance Corp.

The sweeping overhaul, approved 84-33 Wednesday by the House, is expected to spark more insurers to write policies in Florida.

With enhanced competition, insurance premiums will eventually come down, the state's ruling Republicans said, with Floridians likely to see reduced prices in a year to 18 months.

"We know that hope doesn't pay the bills," said Rep. Anna Eskamani, D-Orlando, in challenging Leek's framing of the legislation.

The Senate approved the same package Tuesday, 27-13. Most Democrats in both chambers voted against the measure, crafted by Republican leaders.

Democratic amendments pushing for insurance rate freezes, consumer subsidies and other matters were defeated in party-line votes.

House Speaker Paul Renner, R-Palm Coast, said that while lawmakers acknowledge it will take time for the changes to improve the Florida insurance market, he'll be looking for signs of progress soon from the industry.

The $1 billion in reinsurance money comes on top of another $2 billion in taxpayer money lawmakers made available to the industry during a May special session, again in an effort to lure companies to Florida.

"We have an expectation that we're going to have results from insurers," Renner said of the latest move.

He added, "While it doesn't provide immediate relief on premiums, because we're just not in that situation right now, it does provide immediate relief by raising the prospect that the insurance you had last year will still be here this year.

"I don't like that. Floridians don't like that," Renner said of the higher costs some homeowners will face now. "But we're in a very bad spot."

Florida homeowners pay the highest premiums in the country, almost three times the national average, according to the Insurance Information Institute, an industry organization.

These premiums also are climbing at a rate of about 33% annually, compared to 9% boosts across the rest of the nation.

"I believe that the reforms we made...will solve many of the problems in the market that are driving rates up," said Sen. Jim Boyd, R-Bradenton, an insurance executive who sponsored the Senate's version of the legislation.

The bill (SB 2A) would force the 1.1million policyholders in Citizens out of this cheaper coverage and into private insurance if they get an offer less than 20% higher when they go to renew.

Costly new flood coverage also is added. First-time Citizens customers in a flood zone would be required to have flood insurance beginning in April. Homeowners renewing Citizens' policies in flood prone areas would need the added coverage by July.

Even residents of high-rise condominiums, covered by Citizens, will face the flood requirement. And everyone in Citizens, flood-zone or not, will be forced to have flood insurance, within five years.

Boyd, Leek and other supporters said that shrinking the number of Citizens' policyholders is necessary, since its policies are about 30% cheaper than Florida's common market rate now. In Miami-Dade, Citizens is 40% cheaper.

Because of the market's upheaval, Citizens has essentially changed from its intended role as the "insurer of last resort" to a policy preferred by many buyers. That increases the risk on all state taxpayers who could have to pay more in the unlikely event of a series of major storm claims erasing all of Citizens' reserves.

Citizens' policyholders have doubled in two years, while a dozen insurers stopped writing policies in Florida, including seven that went out of business altogether.

Hurricane Ian, which struck in September, has already drawn $10.2 billion in insurance claims.

"Some people may feel some pain, but if we don't fix this, a whole lot of people are going to feel a lot more pain," Rep. Bob Rommel, R-Naples, said of the changes.

But pushing many Citizens policyholders into private insurance – when they get a just-under 20% increase – will hurt, some lawmakers said. Lower-income Floridians, the elderly and minority communities are especially vulnerable to the increase.

"When Americans get a cold, Black Americans get pneumonia, and our state is a living testament to that," said Rep. Dianne Hart, D-Tampa, chair of the Florida Legislative Black Caucus.

Much of lawmakers' focus centered on the bill's provision that effectively limits the ability of customers to sue their insurance companies when unsatisfied with their claim outcome.

Boyd insisted that "the root" of Florida's insurance problems stem from lawyers suing over claims. He cited industry-endorsed statistics that shows Florida accounts for 7% of the nation's insurance claims, but 76% of lawsuit costs steming from claims.

Democrats have argued the legislation will only further a power imbalance between customers and their insurer.

"Anytime you take away consumers' access to representation, that's a huge damage," said Rep. Hillary Cassel, D-Dania Beach, a property insurance attorney.

"Sadly, so many homeowners are going to be left to navigate this on their own, while insurance companies have offices filled with lawyers, ready to go, ready to fight for them," she added.

Banned under the bill are so-called, one-way attorney fees, which will make homeowners shoulder more of the costs of suing.

Critics warned that homeowners will be put in a tough spot, even if they win a lawsuit, since a large share of their settlement would now go to paying their own attorneys' fees.

In another step aimed at discouraging lawsuits, the legislation allows insurers to offer policies that require property owners to enter binding arbitration, barring them from suing. These policyholders would be assured of some discount on their premiums.

Also prohibited would be the use of Assignment of Benefits (AOB), which many homeowners rely on to hire a contractor who will battle directly with their insurers, but which critics say has been rife with fraud and abuse.

Christina Pappas, 2022 president of Florida Realtors, said the proposed fixes were "absolutely essential" for the many Floridians who "have felt the impacts of the insurance crisis in terms of availability, coverage and reliability."

Legislative Republicans said Floridians say rate decreases won't happen overnight. But Democrats and other critics cast doubt on any benefits.

"What I've heard that was just so simple today was that rates will 'hopefully' drop or eventually, down the road, they might go down," said Rep. Kristen Arrington, D-Kissimmee. "That's no guarantee for our constituents, and this is probably the biggest issue that I've heard from constituents since being elected."

Michael Carlson, president of the Personal Insurance Federation of Florida who testified in committees representing the Florida AFL-CIO, predicted the law's effects would not go well.

"What is going to happen is it's going to be about a year and working families are going to realize that their rates are still high, but they're paying more for less," he said.

"And then when claims start coming in, they're going to not be made whole, and they're going to hold people accountable for this."

Other legislation approved Wednesday before lawmakers left the Capitol seemed aimed at softening the potential impact of the insurance changes.

One measure (SB 4A) provides property-tax refunds for homes across 16 Florida counties that sustained major damage from Hurricane Ian and later, Hurricane Nicole.

Another (SB 6A) offers a 50% toll discount, beginning Jan. 1, for next year to SunPass and other Florida transponder accounts whose drivers record 35 or more transactions in a month.

Senate President Kathleen Passidomo, R-Naples, said lawmakers want to see results, after giving so much help to the industry.

Insurers will be under the microscope, she said.

"I've said a million times, If the rates don't come down, we are going to push them," Passidomo said.

John Kennedy is part of USA TODAY Network's Florida Capital Bureau. He can be reached at [email protected], or on Twitter at @JKennedyReport.

USA Today Network-Florida government accountability reporter Douglas Soule is based in Tallahassee, Fla. He can be reached at [email protected]. Twitter: @DouglasSoule