Scammers are gaming the system, driving up cost of property insurance in Florida | Opinion [Miami Herald]

Living in the freest state in the country is quite costly for many homeowners. Although the real-estate market is hot across Florida, the complex home-insurance market is on the verge of collapse.

In the past five years, eight property and casualty companies have gone insolvent, with three liquidated in 2022. Many companies are leaving the state; others are drastically cutting policies or tightening eligibility requirements.

However, this fragile market is not solely a result of storm damage . . . it is man-made, too.

A strong insurance market must have competition across numerous carriers, ample coverage and affordable pricing. Instead, Florida’s home insurance market is in rapid free-fall because of widespread fraudulent claims and an exorbitant amount of lawsuits to the tune of $1.5 billion in 2021 alone.

The most crucial part of this crisis is contending with out-of-control litigation. The harsh reality is Florida encompasses 8% of all insurance claims in the United States, and almost 80% of the entire nation’s litigations. In 2021, nearly half of the lawsuits filed were in Broward, Miami-Dade and Palm Beach counties.

This is the major cause for insurance companies going bankrupt.

The deluge of fraudulent roof claims and frivolous lawsuits is our biggest hurdle. The schemes perpetrated by some contractors are leaving homeowners uncovered literally. And insurance companies footing the runaway legal costs are assessing risk vs. reward.

We must ensure that the swindlers who are gaming the system by artificially increasing the frequency and severity of claims are prosecuted. That is not to say, however, that there aren’t instances when an insurance carrier wrongfully denies a claim. When this occurs, a policyholder should have the ability to seek legal recourse.

Last year, as lawmakers, we put consumers first passing SB 76 and SB 1598 providing more protection and disincentivizing fraudulent activity that increases rates. Although the legislation passed, there has not yet been ample time for it to make an impact.

Florida’s special legislative session, which begins on Monday, May 23, has one main goal — protect policyholders. To do this, we provide meaningful reforms.

At a bare minimum, the House and Senate must increase the Florida Hurricane Catastrophe Fund (FHCF).

Raising the cap on the state’s catastrophe fund will stop insurance carriers from going insolvent, especially in light of the upcoming hurricane season.

But expansion of the catastrophe fund cannot be the only solution.

Addressing property market challenges also calls for additional tort-reform measures, including amending Florida’s one-way attorney-fees statutes. Policyholders wronged by their insurance carrier deserve the right to pursue damages via the judicial system, but current law has expanded the application of the attorney-fee statute for litigation that is not always legitimate.

While the state should preserve consumer protections, current attorney-fee multipliers should be eliminated; they only serve to increase lawsuits in a state already leading the country in insurance litigation.

One of the gravest matters Florida’s home insurance market is facing is the ever-growing Citizens Property Insurance Corp.

In 2007, Gov. Charlie Crist allowed Citizens to expand beyond its original purpose, Florida’s residual insurance. Citizens, effectively, is subsidizing insurance premiums that are not sound, and undercutting private insurance carriers. In turn, Citizens — or, more to the point, the state of Florida — is on the hook and becoming strained by the system.

We need to reform Citizens and have it adjust rates in accordance to property risks, while also expanding the marketplace in Florida to make the biggest difference. More investment capital and competition, with surplus line carriers, will lower costs. It’s simple economics: When the private marketplace is active, the market is competitive, enticing for more business and more affordable.

During the special session, I will advocate for swift action and comprehensive reforms to stop the hemorrhaging of the property insurance market and to ensure Floridians can weather both the physical and financial storms.

If we lawmakers don’t focus on reducing litigation and attracting insurance carriers to our state, homeownership might become a thing of the past in Florida, affecting its overall economy.

State Rep. Tom Fabricio, an attorney, represents District 103 in the Florida House.

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