Wondering why your insurance rates keep going up? Look into your neighbor’s new kitchen [Miami Herald]
As home insurance premiums keep rising in
The situation is worse in
“These companies, I would say seven or eight of them, will write a new policy if there is a new roof and if there is no claims history,” Bujnicki said. “No claims in five years. That’s a big deal.”
READ MORE: Bad news for
Flood of insurance claims
Besides the billions of dollars in losses caused by hurricanes in
According to the
This situation has prompted many major firms into leaving or scaling down their operations in the state, and forced several smaller ones into bankruptcy.
“In the last two years, since the beginning of 2022, we’ve had seven
Those companies found themselves unable to withstand the expenses incurred with mass volumes of lawsuits. “These are smaller residential insurers that were based here in
The losses generated by the wave of litigation have also affected the operations of companies that have decided to stay.
“There have been more than a dozen other companies that have stopped writing business, meaning they are not writing new policies,” Friedlander said. “They’re still operating, but not writing policies, and there have been several companies that have made significant cutbacks, meaning they’re not renewing large volumes of policies.”
New laws going into effect this year aim to curb the abuse of the legal system by making it harder to sue insurance companies. But agents said it might take a long time before the impact is felt, and the market might take months, if not years, to stabilize.
The situation has become so problematic that homeowners in
Litigation abuse and other factors
Other factors also are playing an important role in the crisis, namely the heavy storm losses, an inflation-related increase in the replacement costs of a home, and a 60% to 65% increase in the rate of reinsurance — the policies insurance companies buy from larger companies to help them cover large claims.
But litigation abuse is the main reason rates in
“All of this abuse with the claims is what created the problems that we are having right now,” said Fermín Acosta, of
“It is not that insurance companies have been trying to do whatever they want and charge more, but rather that they were forced to increase their rates by the high number of claims they have, by the situation in the state of
Public adjusters
The situation has been made worse by what Acosta called the abuse of public adjusters and others who knock on doors telling people they can help them get a new roof after finding two or three broken shingles — if they sign papers yielding their claims to the adjuster.
Claims of this type often lead to lawsuits in an attempt to obtain large insurance payouts.
“Practices like this should be controlled and even penalized,” Acosta said. “It shouldn’t be allowed for homeowners to transfer their rights only because someone knocked on his door telling them they can get them a new roof.”
Public adjusters respond that insurance agents’ claims of excessive litigation are not only exaggerated but seek to attribute to others the consequences of their own mismanagement. They also argue that insurance companies have been hit hard by the fact that they operate inside a high-risk state, and that seeing their finances hurt by hurricanes, they simply began to short-change their clients.
“Have they kept their obligations to their clients, had they they kept word, I would be without a job,” a
Homeowners caught in the middle
“You can’t blame the people who pay premiums for their insurance policies when they file a claim because they have damages. I mean that’s the literal definition of blaming the victim,” Buvens said. “They now want us to feel sorry for the insurance companies because they didn’t plan appropriately for the money that they took. ... The insurance crisis in
“Insurance companies have spent millions in a narrative that they are going to be there for their customers if anything happens — we are your neighbors, you are in good hands — and then fail to come through when they are needed,” Jarrell said. “ I know some insurance companies have gone out of business, but to what extent is it mismanagement of the funds that they have when they are paying millions of dollars to their own executives?”
Yet, insurance agents insist that system abuse is largely responsible for the mess
Bujnicki said the problems began when a large number of homeowners decided that they could use their insurance policy to pay for their new kitchen, taking advantage of the language used in the contracts, which tended to be loose.
He added that Instead of fixing a leak in the kitchen, for example, they would find a public adjuster and a lawyer and file an
“So they sue for a brand new kitchen, instead of fixing the problem which they could have done if they just bought some plywood and wallpaper to repair the bottom of the cabinet,” Bujnicki said.
And while those homeowners may have gotten their new kitchen, other homeowners are left picking up the tab for the abuse, he said.
“Someone has to pay,” he said. “Nothing in life is really free.”
©2023 Miami Herald. Visit miamiherald.com. Distributed by Tribune Content Agency, LLC.
AM Best Affirms Credit Ratings of Bahrain Kuwait Insurance Company B.S.C.
Al Redmer Jr. Joins eHealth's Public Policy Advisory Committee
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News