Reducing High Cost Of FL Property Insurance Goal Of Special Session

FLORIDA — Legislators kicked off a weeklong special legislative session Monday in which they hope to stabilize Florida's tumultuous property insurance market in the wake of damages from Hurricane Ian and Hurricane Nicole.

Last week, Senate President Kathleen Passidomo, R-Naples, and House Speaker Paul Renner, R-Palm Coast, issued a formal proclamation stating the Legislature will convene Dec. 12 to 16 to discuss proposals aimed at reducing mounting insurance rates and prevent insurance carriers from dropping policing or pulling out of the state completely.

Passidomo's list of things to accomplish during the special session includes:

• Reduce the cost of litigation for property insurance claims.
• Make reinsurance available for carriers.
• Improve claims handling practices.
• Limit the assignment of benefits under property insurance policies.
• Require alternative dispute processes to reduce court costs.
• Increase oversight of insurers in the Florida market.
• Stabilize the financial stability of the state-supported Citizens Property Insurance Corp. and transition Citizens Property Insurance Corp. policyholders back to the private marketplace.
• Provide tax relief and other financial assistance related to damages from hurricanes Ian and Nicole.

Under Senate Bill 2-A, sponsored by Sen. Jim Boyd, R-Bradenton, lawmakers will consider creating the Florida Optional Reinsurance Assistance to keep private insurers solvent by creating a $1 billion reinsurance fund, reducing the cost of litigation and requiring that some property owners seek coverage in the private market instead of using Citizens Property Insurance Corp.

With six major insurance carriers in Florida filing for insolvency this year, leaving hundreds of thousands of homes in the state uninsured, and another dozen carriers unable to cover all the claims, Florida Chief Financial Officer Jimmy Patronis said the special session on insurance reform and hurricane recovery is critical to resolving the growing property insurance crisis.

Related:

• Escalating Property Insurance Rates In FL Topic Of Special Session
• Homeowners Insurance Crisis Could Lead To FL Special Session
• FL Property Insurance Reform Focus Of Special Session OKed By DeSantis

Among other things, Patronis said the special session will attempt to remove "the warped financial incentives that have made Florida No. 1 in the country for property insurance lawsuits and No. 1 in the country for insurer instability and rate increases.

"This will be an opportunity to fundamentally restructure Florida law, benefiting policyholders," he said. "The sooner we do something to address litigation reform in the property and casualty market, the better."

At the same time, Patronis said the Legislature will crack down on insurance fraud.

"After Hurricane Ian, we got reports that unscrupulous public adjusters and unlicensed contractors were out and about trying to shake down families when they were in a vulnerable state," Patronis said. "We’ll pursue legislation to ban assignment of benefits and stop bad actors from profiting off disasters."

An assignment of benefits, or an AOB, is a document signed by a policyholder that allows a third party, such as a flood mitigation company, a roofer or a plumber to seek payment directly from the policyholder's insurance company.

"Every year since I’ve been in office, we’ve worked with the governor’s office and Legislature on ways to improve Florida’s insurance market, and this special session will be the most significant opportunity to make lasting reforms to benefit policyholders and drive down costs.”

Between this year and 2021, the Florida Office of Insurance Regulation saw a slew of insurance carriers declaring insolvency, pulling out of the Florida market or refusing to take on additional Florida policies.

In the meantime, property owners who still have insurance are seeing rising premiums. Those without insurance are turning to Citizens, which was supposed to be the state's insurer of last resort but has become one of its largest insurance carriers.

"Once we do all that I expect we're going to do in this special session, I do believe we will see some downward pressure on rates but don't expect it overnight," Renner said during a news conference last week. He said it could be two years before property owners see any relief from the legislation.

Newly appointed House minority leader Rep. Fentrice Driskell, D-Tampa, said the Democratic side of the aisle is hoping for bipartisan cooperation to resolve the crisis.

"We want to provide balanced solutions that certainly protect the homeowner, but also allow us to have a competitive market so that the insurance companies can compete," Driskell said. "They provide a service that we very much need. So what can we do to make corrections in the market to help everybody all around?"

She said Democratic lawmakers are in favor of making reinsurance more widely available so insurance companies can recover their losses when a disaster strikes.

Reinsurance is a reimbursement system that protects insurers from very high claims. It usually involves a third party paying part of an insurance company's claims once they pass a certain amount.

Reinsurance is considered a viable way to stabilize an insurance market and make coverage more available and affordable.

"Our caucus believes those changes need to be robust," Driskell said.

One measure the Legislature will explore is a way to de-incentivize lawsuits. Florida has 8 percent of all insurance claims in the country but has 76 percent of lawsuits against insurers.

Among the considerations is ending one-way attorney's fees, which allows the prevailing party to recover their attorney's fees.

According to Mark Friedlander, the public information officer for the Insurance Information Institute, Florida had 116,000 lawsuits filed against insurers last year. Another 130,000 lawsuits are expected in 2022 as a result of hurricanes Ian and Nicole.

The turmoil in Florida’s homeowners insurance market is being caused primarily by the state’s outsized number of lawsuits and its commonplace fraud schemes, according to an Issues Brief published by the Insurance Information Institute.

"Floridians are seeing homeowners’ insurance become costlier and scarcer because, for years, the state has been the home of too much litigation and too many fraudulent roof-replacement schemes,” said Sean Kevelighan, CEO of the institute. “These two factors contributed enormously to the net underwriting losses Florida’s homeowners’ insurers cumulatively incurred between 2017 and 2021.”

He said Florida homeowners pay the highest average property insurance premium in the U.S. at $4,231, nearly three times the U.S. average of $1,544.

The net underwriting losses for Florida domestic property companies exceeded $1 billion in both 2020 and 2021, according to the Issues Brief, leading to insurer insolvencies and rating downgrades.

Some insurers who were able to withstand these negative financial trends have reduced their exposure to Florida’s homeowners market by issuing non-renewal notices to existing policyholders or restricting the writing of new policies in the state, Kevelighan said.