New property insurance rules may not go far enough

"It's not going to end the crisis we're facing."

Mark Friedlander

Spokesperson for the Insurance Information Institute

Even as lawmakers put the last touches on solutions to address the crumbling property insurance market during this week's special legislative session, industry analysts and experts questioned whether the reforms will go far enough to convey immediate and meaningful benefits for consumers.

Some of the doubts were voiced from within the ruling GOP caucus in Tallahassee.

Homeowners shouldn't expect any relief to their premiums until at least 2023, state Sen. Jim Boyd cautioned his colleagues this week. The Bradenton Republican, who also is an insurance agent, attempted to speed up the relief by proposing amendments to his bills on Tuesday that would expedite rulemaking and rate hearings.

The package of measures pushed through by the Legislature include an attempt to demystify insurance industry data while setting aside money for reinsurance for insurers as well as incentives for homeowners to make storm-related improvements.

Yet Boyd could not guarantee that the measures would reduce rates – or increase them. He did single out improvements in provisions within the legislation to limit attorney fees in certain circumstances and mandate that roof contractors who solicit homeowners to notify them about deductible requirements.

"We absolutely believe that with the solicitation reform, the legal fee reform and the other components in this bill, there will be relief. I can't tell you what that is," Boyd said Tuesday. "Sadly, it's going to take ... probably a year to 18 months to filter through the rate-making process for the balance of the relief that this bill will bring."

Other measures to freeze rates or offer homeowners relief left out

Attempts by other lawmakers to freeze rates or enact more swift relief for homeowners did not pass, however.

Mark Friedlander, spokesperson for the Insurance Information Institute, noted that the legislative package passed this week is an "important first step toward the stability of Florida's insurance market," but consumers should temper expectations.

"It's not going to end the crisis we're facing," he said.

A major part of the proposal includes a $2 billion, taxpayer-funded reinsurance program to allow certain insurers, ones that are unable to access this necessary safety net in the private sector, to access one year's worth of reinsurance for free. In turn, insurance companies that participate in the program will be required to pass on these savings to their policyholders by reducing rates.

"Even if you were holding on by your fingernails, if you wanted to participate in the program, you have to go back and show the benefit to the consumer," said Caple Howden, who runs an Orlando-based insurance brokerage and is the past president of the Professional Insurance Agents of Florida. "If the taxpayers are fronting the $2 billion to alleviate and help the pain of the insurance company, that should trickle down."

Friedlander was not convinced that the proposal will ultimately restore a diverse field of insurers offering lower-cost coverage, although it will keep companies in the marketplace and not further drive competition down.

"The intent is to keep some companies viable so they won't lose their ratings and be liquidated," Friedlander said. "This is not intended as a savings program."

Separate roof deduction on policies greeted with skepticism

Another proposal sought to offer homeowners another avenue to reduce their rates, by giving them the option of a separate roof deductible of up to 2% or 50% of the cost to replace their roof. But this alternative offered only the appearance of a rate reduction by trading in a lower premium for less coverage and a higher deductible, said Amy Boggs, a St. Petersburg property insurance attorney who serves as chair of the Florida Justice Association's Property Insurance Section.

"It's not a good idea to reduce coverage and make it more difficult to enforce the policy in exchange for lower rates," Boggs said.

One reform that could be viewed as a step in the right direction may have unintended impacts, others said. In the package of changes being sent to Gov. Ron DeSantis is a prohibition on insurers from dropping a homeowner if their roof is fewer than 15 years old. If the roof is more than 15 years old and an inspection shows that it has at least five years more of life, coverage must continue.

"That's a significant benefit for our clients across the state," Howden said.

That much seems like a win for consumers. But Friedlander said this part of the legislation may prove to be a "double-edged sword." While this would keep homeowners from losing their insurance solely over roof age, he said, insurance companies could consider this requirement as an increase in risk, and in turn raise premiums to offset exposure.

"When you mandate insurers to write coverage that they consider high risk, it could lead to two outcomes: broad rate increases or the decision to stop writing business in the state," Friedlander said. "Either scenario leads to higher costs of home insurance for Floridians.

Crackdown on insurance litigation gets support from lawmakers

There are mixed reviews of how the changes will affect insurance-related litigation across Florida. Excess litigation has been a battle cry made by the industry as one of the factors most adversely impacting their property insurance business.

The limits placed on attorneys fees will hurt the consumer because it will make it more difficult for the homeowners to find a lawyer willing to take on their claim case, Boggs said. Plus, a rule that requires a homeowner to establish that an insurer has breached the contract in order to make a bad faith claim puts the consumer at "a significant disadvantage," she said.

"In any other context, when you're looking at an industry with a high instance of litigation, you would say there's something wrong there," Boggs said.

Boggs added it "feels like we're in a dystopia" since the blame for the industry's woes is placed on the consumer, and that the bad faith measure is "incentivizing bad behavior."

On the other hand, Howden said the court-related measures benefit the consumer because insurance companies won't be on the hook for unanticipated attorneys fees.

"If companies are faced with these astronomic cost drivers, they would not be able to operate," he said. That in turn causes premiums to increase.

What's else is missing in insurance legislative reforms?

Some experts say certain measures weren't addressed in the package, besides rate freezes that would have immediately injected stability in costs for homeowners.

The state's Chief Financial Officer Jimmy Patronis offered five anti-fraud proposals ahead of the special session, such as three "Anti-Fraud Homeowner Squads" and a $3 million public education campaign, but none of the suggestions were accepted, Friedlander said.

Plus, there was no specific legislation focused on Citizens Property Insurance Corp., the state-run insurer of last resort that is expected to hit 1 million policies this year.

Nor did the Legislature include any proposals that targeted the number of claims filed or discourage lawsuits over unpaid claims.

Even so, Patronis and other state officials and insurance industry leaders applauded the legislation and the governor in news release sent out Monday by the Florida Office of Insurance Regulation.

"I applaud the Legislature for proposing to expand and bolster the Home Hardening priority through the $150 million My Safe Florida Home proposal," Patronis said.

"While Florida's hardening insurance market faces challenges from a number of issues like inflation, fraud, and Mother Nature, the most important thing members can do this session is put policyholders first. I am especially hopeful that one of the reforms being considered, which effectively supercharges our $462 million Home Hardening priority that the Governor recently signed into law, will make it over the finish line."

Howden said more could have been done to address fraud. While the legislation requires that homeowners are explicitly notified that they must pay the deductible for claims on roof damage and can't have contractors reimburse the deductible, it does not stop the door-to-door solicitation.

The insurance industry also has sought to target roof contractors who scour neighborhoods for clients, offer to take over their clients' claims and, if not paid out, sue the insurance company.

"That has to stop. We need to make sure that gets done in a very expedient manner," Howden said.

Hannah Morse covers consumer issues for The Palm Beach Post. Drop a line at [email protected], call 561-820-4833 or follow her on Twitter @mannahhorse.

"It's not going to end the crisis we're facing."

Mark Friedlander

Spokesperson for the Insurance Information Institute