Frustration on Florida insurance rates brings perfect storm

TALLAHASSEE — Florida lawmakers returned to the Capitol on Monday to try to stabilize a troubled property insurance market plagued by skyrocketing rates and a parade of companies dropping policies or going out of business.

Lawmakers debated putting $2 billion in state money at risk to bolster insurers struggling to get affordable reinsurance, allowing policies with separate roof deductibles and other big changes as they sought to address a growing crisis that threatens homeowners and the state's economy.

While Democrats worried that the proposed reforms will lead to more out-of-pocket costs for homeowners if they file claims, and wondered if they do enough to reduce premiums, Gov. Ron DeSantis predicated a "very positive outcome" from the special legislative session he called to address property insurance concerns.

"It is something if you're looking to buy into Florida to be able to have access to affordable insurance is very, very important," DeSantis said during a press conference in Cape Coral, underscoring the insurance industry's importance to the state's economy.

DeSantis touted some aspects of insurance reforms unveiled last week, including money to help homeowners harden their properties against hurricanes and get an insurance discount, but didn't comment on some of the more controversial aspects of the legislations, which lawmakers are expected to pass by the end of the week.

The $2 billion price tag to give insurers relief from high reinsurance rates and limited availability shows how big and costly the property insurance problem is for Florida.

The state could lose all or part of that $2 billion if a hurricane hit Florida. The money would be used to provide government-issued reinsurance coverage — essentially insurance for insurance companies that limits their potential payouts — free of charge for one year, with the requirement that rates are lowered.

Lawmakers are contemplating whether to take that risk with state money to help stabilize the market and relieve what already is a costly problem for homeowners, who are seeing rates increase by double digits, losing coverage, and being hit with assessments to pay the claims of failed insurers.

Florida lawmakers consider several options to address insurance costs

Yet while officials hope to lower the upfront insurance costs for homeowners through lower premiums, they also are considering whether to allow insurers to sell lower cost policies that shift more of the expense for roof repairs to homeowners if they file a claim. The main reform bill would authorize policies with a separate deductible for roof repairs of up to 2%, which equates to $6,000 for a $300,000 home, or 50% of the cost to replace the roof.

The $2 billion reinsurance program and roof deductible provisions are among a host of changes to insurance law contained in two bills debated by the Florida Senate Monday.

The legislation also seeks to:

Limit lawsuits against insurers by reducing the fees attorneys can recoup and making other changes.

Prohibit insurers from refusing to write policies on homes that have older roofs.

Increase insurance company transparency to address concerns about their stability and financial practices.

The Senate Appropriations Committee considered the two insurance bills sponsored by Sen. Jim Boyd, R-Bradenton, Monday.

Democratic lawmakers quizzed Boyd about the proposed roof deductible, questioning whether that is something that most people could afford.

"We're putting a real cost burden on consumers," said Sen. Bobby Powell, who pushed an unsuccessful amendment that would have dropped the deductible down to 20% of the value of a roof.

Boyd said the larger concern is rising premiums.

"What is becoming almost unbearable is their ability to pay the homeowners premium renewals they're getting in the mail today," Boyd said.

Democrats also raised concerns about efforts to limit insurance lawsuits. Some argue that they could hurt the ability of homeowners to get their claims paid.

The insurance industry is pointing to frivolous lawsuits as the biggest driver of premium increases, claims echoed by DeSantis and Boyd.

Sen. Darryl Rouson asked how it would improve rates "if there's less of a stick against an insurance company to hold them accountable."

Boyd said the "stick is still there" but he hopes to reduce the number of "frivolous bad faith lawsuits."

Sen. Jason Pizzo questioned whether insurance companies own practices are making them weaker, noting that examinations done of failed insurers found some diverted money into affiliates.

Pizzo asked if anything is being done to examine the "flow of funds that goes flying out of these companies that render themselves insolvent by their own actions."

Boyd said state insurance regulators already have the ability to look into insurer's business practices.

Democrats kept returning to the question of whether the legislation would reduce premiums.

While some provisions in the bill, such as the $2 billion reinsurance fund, are tied to rate cuts, Boyd said it would take up to 18 months for the other changes to impact rates.

Hillary Cassell with the Florida Policyholders Cooperative called the legislation an "insurance company wish list."

Boyd also faced questions from Republican Sen. Jeff Brandes, who opposes the provision prohibiting insurers from denying coverage to homeowners with older roof. Brandes said that will just make Florida's insurance crisis worse. "This is a big government policy that we should not be doing because it frankly is removing the only safeguard that the property insurance companies have to deal with the litigation," Brandes said. "You are making them walk into the lion's den."

Brandes also wondered whether the $2 billion new reinsurance program will be enough to ensure Florida insurers will have the coverage they need heading into hurricane season. He wondered if lawmakers would have to return in a few weeks to "save the life" of struggling companies. Boyd said the new reinsurance program should be "sufficient."

An insurance agency owner, Boyd said this is the worst insurance market he's ever seen and immediate legislation is needed.

"Some carriers are on life support, some are about to pull the plug, others are in critical condition," Boyd said, adding: "I don't know that it could be any more serious, and thus we're here."

Rate hikes expected

to continue for Florida homeowners over coming months

Whatever comes out of the special session, homeowners are almost certain to keep seeing rate hikes for months, because the Florida insurance market is already so battered. Rising building costs, gas prices and inflation add to the woes, experts say.

"You can't look at the state of the private insurance market in Florida and say it's good," said Charles Nyce, an expert on insurance and risk management at Florida State University. "It's an extremely fragile market that we have. A significant storm, or a series of storms will cause real problems."

The June 1 start of hurricane season is a worry.

But for DeSantis and state lawmakers, the November elections also are a concern as they look to quiet a voting public with their actions while hinting that someday — maybe — property insurance will get cheaper.

Florida's tumultuous property insurance market is the product of a perfect storm.

Lawmakers and business leaders blame the volatility on several factors — fraudulent claims, frivolous lawsuits, rising reinsurance costs and the frequency of severe weather in the Southeast — among other things.

Whatever the reason, one thing is clear: Floridians are experiencing higher-than-average premiums, sweeping cancellations and witnessing the swift exodus of private property insurance providers.

The market's tailspin, though, didn't happen overnight.

"This has been something that's been a problem in this state for a long time," DeSantis noted Monday.

In fact, many accuse lawmakers of kicking the can down the road despite ample warning.

The signs of a growing storm were plenty. At least six companies offering property insurance vacated Florida in the last five years while rates ballooned among the highest in the nation, and three insurers have gone insolvent in the last three months.

Meanwhile, more than 400,000 homeowners in less than two years flocked to Citizens Property Insurance, a state-run entity created by lawmakers in 2002 as the "insurer of last resort."

Without intervention, prognosticators fear Citizens may instead become Florida's last-standing insurer. It is projected to have one million policies by the end of the year.

Few analysts foresee state leaders dramatically revitalizing the market within a week-long special session.

Sarasota Herald-Tribune Political Editor Zac Anderson can be reached at [email protected]. Follow him on Twitter at @zacjanderson. USA Today Network-Florida reporter Jason Delgado is based in Tallahassee. He can be reached at [email protected].