Property insurance reforms won’t slow soaring premiums, experts warn [Orlando Sentinel]

TALLAHASSEE — The Florida Legislature has been tweaking the property insurance laws for decades to shore up an industry with a long history of being undercapitalized, denying policyholder claims and enduring a tidal wave of lawsuits that far outpaces other states.

This week marked the latest effort to fix things, this time by granting major concessions to the insurance lobby while making it harder for policyholders to sue carriers when they fail to pay claims on time, shortchange homeowners or don’t pay at all.

Even after kicking the can down the road for years, lawmakers admitted they are not done.

“I’m not saying mission accomplished and release the confetti,” said House Speaker Paul Renner, adding there would be more work on insurance reform during the regular 60-day session in March.

And while Republicans touted the bill as landmark legislation to “stabilize the market,” they admit it will not lead to immediate rate reductions for homeowners. They also said this year’s hurricanes Ian and Nicole and existing litigation will affect the future of the market for months and years to come.

“I am not suggesting companies won’t go out of business after the passage of this bill,” Renner said. But without it, he said, “I guarantee significant increases in rates.”

Mark Friedlander of the Insurance Information Institute, a national industry analyst, said, “We do not expect to see immediate relief for consumers but the eventual goal is to moderate premium increases, which are averaging 33% statewide this year, and to attract more insurance companies to write residential business in Florida, which will benefit all homeowners.”

Rates will continue to escalate in the short-term, however, because of ongoing litigation expenses, he said, estimating some 130,000 property claims lawsuits will be filed this year in Florida. Those rates are also affected by rising replacement costs caused by inflationary impacts on construction material and labor, he said.

Floridians, who are already paying an average of $4,231 this year, will most likely continue to pay the highest average premium in the country in 2023, Friedlander said. He estimated average increases will run 40% or higher next year statewide.

Gov. Ron DeSantis, who was expected to sign the bill Friday, said he asked to see what other states were doing that don’t have the same problems as Florida. He said the bill would “realign Florida to be more reflective of insurance markets in other states that don’t have the significant litigation problems that we have,” he said.

He expected there would be immediate changes with “more people willing to write policies.”

But Chris Dittman, head of Florida strategies for Aon Reinsurance Solutions, said any change in Florida’s high-risk market will be slow in coming.

“There will be some excitement that capital is going to move into the state, but the capital providers will want to see normalization of the playing field first,” Dittman said. “They will take a wait and see approach, see what this means before the capital rushes in. If it does what it’s supposed to do, the capital will come.”

The bill also is designed to require Citizens Property Insurance policyholders to buy flood insurance even if they are not in flood zones, and make them go back into the private market if they can find a comparable policy for less than 20% above their rates with Citizens.

Democrats don’t like it

The bill drew fire from Democrats, who tried to amend it to include immediate rate relief and caps on increases, mandate regulation of the insurance companies and subsidies to help lower-income homeowners pay for their policies.

“Florida House Republicans and senators just passed a bill that provides a $1 billion bailout to insurance companies and no real rate relief for Florida homeowners,” Rep. Fentrice Driskell of Tampa, the Democratic caucus chair, told reporters after the session ended Wednesday.

Driskell said she hoped homeowners are “watching and paying attention” and hold their elected officials accountable for their actions at the polls.

Combined with a $2 billion reinsurance subsidy approved in May, the state has given the insurance companies $3 billion in taxpayer dollars to buy reinsurance, which they use to protect themselves from the huge payouts that come from catastrophic events such as hurricanes.

Reinsurance accounts for 49% of the premiums Floridians pay.

Companies that took part in the first bailout, called the Reinsurance to Assist Policyholders, were required to pass savings onto customers. But Office of Insurance Regulation records showed premium reductions ranging from 0.1 % to 3.9% by companies that later turned around and requested double-digit rate increases.

Nor has two years of insurance reform stopped companies from dumping policyholders, going out of business or making plans to sell off more and leave the state. About a dozen have left the state or stopped doing business in the past two years, 27 are on the Office of Insurance Regulation’s watch list and four have been downgraded from an A-rating.

“I believe there will be lawsuits filed on this, as there are equal protection arguments and access to court violations within this bill,” predicted Richie Kidwell, president of the Restoration Association of Florida, a advocacy group for independent contractors.

He already has two lawsuits on appeal challenging recent changes in state contractor and insurance laws.

Where did big profits go?

Democrats criticized the industry for frittering away the massive profits it saw over more than a decade without hurricanes and saw huge profits that were passed onto subsidiary companies, management agents and executive bonuses.

The bill earmarks $1.7 million for the Office of Insurance Regulation to hire more agents to investigate complaints about carriers withholding or delaying payments and other violations of state insurance law.

The Legislature, whose members received $15.6 million in contributions from the insurance industry in the 2022 campaign season, gave insurers what they’ve wanted for years. They received an end to one-way attorney fees that required them to pay the policyholder’s legal fees in addition to the claims amount if customers win and the elimination of assignment of benefits, which allows property owners to sign over their insurance payments to their contractors.

Republicans and industry officials said those changes go to the heart of the astronomical rise in premium, which they blame on the high volume of lawsuits filed over disputed claims.

Republicans say the changes will eliminate frivolous lawsuits and fraudulent claims, but Democrats, trial lawyers and consumer advocates say it restricts the public’s access to the one recourse they have against carriers that act in bad faith — a court of law.

“Unfortunately, this round of reforms is a massive overcorrection that takes away homeowners’ property rights and leaves Floridians at the mercy of their insurance company,” said Ron Haynes with the Florida Justice Association, an advocacy group for trial lawyers. “Nothing in this legislation will do anything to improve the environment for Florida’s property owners.”

On average, Floridians pay three times as much for property insurance as other states, and have seen rates increase by double digits in recent years.

“Hearing from homeowners throughout Florida reminded us how bold insurers have been, even before this drastic legislation further removed homeowner rights,” Haynes said. “If insurance companies do right by their insureds, they will not have to be concerned with lawsuits.”

Republican Rep. Tom Leek listed reinsurance and frequent hurricanes as drivers of the skyrocketing premiums, but puts most of the blame on costly litigation, citing the oft-quoted statistic that Florida is responsible for 8% of property insurance claims nationwide but 76-79% of all related lawsuits.

That number has been disputed by Democrats and some industry analysts, who point out that it doesn’t take New York and Texas into account.

“Litigation isn’t the problem – it’s the scapegoat. Behind every lawsuit is a homeowner or business owner who has been underpaid or wrongfully denied coverage,” Haynes said. “These people are desperate to repair their homes or restore their businesses. Policyholders are living up to their end of the bargain under the insurance contract. It’s time the Legislature put real reforms in place to ensure insurance companies do the same.”

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