During the 2021 session, Florida’s Legislature passed a property insurance reform bill making significant changes to the state’s property insurance markets. The changes are meant to stem the Florida-based property insurers’ losses that doubled over the 2019-2020 period. In 2020, property insurers lost over $1 billion, and they have been on a losing streak for the last three years.
Provisions of the New Law
The new legislation allows Florida’s insurer of last resort, Citizens Property Insurance, to increase its premiums from the current maximum of 10% to as much as 15% annually. The legislation also includes measures meant to mitigate the avalanche of litigation that David Altmaier, the state Insurance Commissioner, says has led to the losses, and in turn, to an increase in property insurance rates in Florida.
According to the Florida Office of Insurance Regulation, in 2019, homeowner’s insurance claims in Florida only accounted for slightly over 8% of claims opened by insurers in the U.S. However, Florida accounted for over 76% of cases of litigation against insurers in the U.S. The new bill also includes changes to the statute that allows for a one-way attorney fee, as well as changes to the deadline for filing claims. It also adds new restrictions and requirements for roofing contractors.
Insurers blame their financial woes on unscrupulous contractors who canvass neighborhoods and solicit homeowners to file superfluous claims. Insurance companies also fault Supreme Court decisions and state law that allows property owners’ attorneys to collect their fees – in some cases multipliers in addition to the standard fees – from insurance companies when they win cases, whereas the insurers don’t enjoy the same benefits when they win such cases.
According to Florida Property and Casualty Association’s executive director, property insurance rates are going up in Florida because the state has become increasingly risky for insurers. Conversely, some attorneys and contractors blame insurance companies who are unwilling to compensate for legitimate claims, a few bad actors, as well as the rising reinsurance costs due to disasters that are occurring nationally.
Insurers’ Response to Losses
In response to the mounting losses, insurers are filing more than a 20% increase in property insurance rates. Additionally, insurers are cutting costs by letting go of clients who own older homes, particularly those with over 10-year-old roofs. Soon after the bill was passed, Florida’s regulator approved three insurance companies’ requests to drop over 50,000 homeowners policies in the face of oncoming hurricane season. The current conditions of the property insurance market have exposed homeowners across Florida to the kind of difficulties of getting affordable coverage that was previously only experienced by residents of Palm Beach, Broward, and Dade, who’ve struggled for a long time.
Will the Reforms Lower Insurance Rates?
Kyle Ulrich, the President, and CEO of FAIA (Florida Association of Insurance Agents), says the association supports the reforms, but the new legislation’s impact on the property insurance market will likely be felt after at least 18 months. FAIA has also advised agents to get used to placing clients with Citizens. While Citizens has grown because of insurers offloading their risks, its operating losses since 2013 have also increased to about $690 million. It currently relies on its investment gains, but that’s unsustainable in the long term. If Citizens consumes all of its reserves due to the increasing number of policyholders and litigation claims, it’ll be forced to cover claims by first levying a tax on its customers and then on all insurance customers in Florida regardless of whether or not they are covered by Citizens.
This is how Florida’s latest property insurance reforms will impact your insurance costs. For an affordable property insurance policy in Florida that suits your needs and budget, contact our experts at Atlas Insurance today.