Florida’s insurance market needs powerful medicine


If the Florida homeowners insurance market were to undergo a medical examination, the diagnosis would find the patient seriously ill. The patient’s vital signs – his financial results – are worrisome. Moreover, there are multiple joint diseases. The combined wave of symptoms reveals that the patient is one step away from the emergency room. Consider seven signs of illness below:

1. red ink. Insurance companies operating in Florida overwhelmingly report unprofitable results. Insurance companies combined Lost $1.5 billion from their Florida business in 2021, the year no hurricanes hit the peninsula.

In 2016-2019, Florida’s homeowners insurance market mentioned with a combined rate of 117.5 per cent. This means that for every $100 of the premium, insurers paid $117.50 in losses and expenses. This compares to the overall insurance industry which has a combined rate of 100.7 percent. An industry investment income ratio — investment income divided by net premiums — of 7.9 percent makes overall industry results profitable, with a seven-point profit margin. However, investment income isn’t enough to lure Florida homeowners business into the black, as determining the investment income resulted in an operating margin of 109.6 percent, which means that Florida home insurers lose an average of $9.60 for every hundred dollars of their Premium proceeds.

2. administering last rites. Many insurance companies in Florida have become insolvent in recent months and years. The common denominator in corporate obituaries for these companies is claims costs that far outweigh premium growth. Include the most recent victims Gulf StreamAvatar and Johns.

3. be resigned. Many property insurers realize that continuing in the Florida market is wasting good money after bad, and they are strategically withdrawing from the state. latest like Advertising, in March, was of Lexington Insurance, part of the AIG family. What makes Lexington’s departure troubling is that Lexington is an E&S insurance company. E&S companies focus on high-risk businesses that a standard insurer wouldn’t touch. While standard insurers run out of burning buildings (figuratively), E&S tankers run into burning buildings. Because they are willing to insure business that others won’t, regulators allow E&S insurers the freedom to charge premiums and issue insurance contracts as they see fit, without having to abide by protection fences set up by state insurance regulators who oversee rates for standard insurance lines. and models.

4. Limit your losses. Insurers operating in the Sunshine State continue to take defensive tactics, cancel policies, limit coverage and raise rates (see table below).

Insurance companies pause or reduce your risk of falls Suspension
Lexington Withdrawal from Florida, announced in March 2022
Lighthouse I Stopped Writing New Business for Florida Homeowners, February 2022
Florida Farm Office I Stopped Writing New Business for Florida Homeowners, February 2022
worldwide 13,000 of 57,000 Florida policies dropped
gradual 56,000 homeowners policy dropped in Florida
Type The new insurance company stopped writing in Florida

5. Those who fight and run live to fight another day. The growth and profitability strategy for insurance companies with a footprint in Florida is to increase their out-of-state business while reducing their Florida portfolio. For example, Heritage Insurance, which in 2021 had 86% of its business in Florida, reported in its fourth-quarter 2021 earnings. a call That it had a 10.9 percent decrease in personal line policies in Florida and a 10.7 percent increase in personal lines outside Florida.

6. swollen citizens. Citizens Property Insurance Company (Citizens), the state-run “insurer of last resort” has become a “first resort insurance company” as insurers in the private market refrain from offering coverage to clients who cannot find insurance elsewhere. in late MarchCitizens President and CEO Barry Gilloway predicted that his company will have more than 1 million policies by the end of 2022. Citizens add nearly 5,500 new Policies In the week. At the end of March 2022, citizens had 801,341 policies, up from 570,000 one year earlier.

7. Litigation gone wild. Recently citizens ReportGilloway also noted a “worrying trend” in lawsuits to date through June 2021 — the number of lawsuits against insurance companies, excluding citizens, increased 51 percent year-over-year to 50,951 from 33,800 in the first six months of 2020. Long worrying – the same Report It reveals that the rise in lawsuits involving Florida homeowners has tripled from 27,416 in 2013 to 8,507 in 2020.

Litigation and litigation

Unlike many Louisiana Insurance companies That succumbed to losses from Hurricane Ida in 2021, Florida’s insurance failures and withdrawals were not driven by natural disaster losses. Florida’s woes are caused by excessive litigation.

Although excessive litigation is the direct cause of property insurance issues in Florida, it is not appropriate to blame the attorneys. Lawyers sue – that’s their job. The problem arose from the unintended consequences of a range of laws and state Supreme Court decisions that created loopholes that enable contractors, attorneys, and homeowners to inflate the number and value of claims payments. comprehensive Report By Jay Fracker on the dire state of Florida’s insurance agrees with this assessment, finding that “everyone benefits only by the rules of the game.”

Florida Bureau of Insurance Regulation 2020 Annual Report The staggering statistic presents that “in 2019, Florida accounted for 76.45% of all homeowners’ claims opened against US insurers even though it represented only 8.16% of all homeowner claims opened by insurers in the US.”

treatment

Reforming the Florida homeowners insurance market requires determination in the state legislature to pass a comprehensive set of reforms. In the legislative session ending in March 2022, the only important bill to be introduced was SB 1728, which were temporarily postponed, and ultimately failed because they were never reconsidered in the last days of the normal 60-day cycle. This bill is aimed at unscrupulous rooftop contractors, but it’s a far too weak drug for a critically ill patient that may continue to support life if this year’s hurricane season turns out to be severe.

Just as working with a patient with multiple illnesses is complicated, solving insurance problems in Florida is no easy feat. We propose the following legislative initiatives:

  • Slay the monster replace the roof. Roofs should be valued on an actual cash basis, rather than a replacement cost basis. A homeowners insurance policy is not a maintenance agreement. Natural roof wear is not a covered cause of loss.

SB 76approved in the 2021 legislative session, aims to petition the unscrupulous bishop’s contractor practices, including that contractors pledge “free roofs” when any damage is from the life of the roof and not from wind damage. A federal court blocked this part of the bill, claiming that the roof contractor’s requests are a protected form of free commercial expression.

1728 Session of the Subsidiary Body, as introduced in the 2022 Legislative Session Allow Contractor solicitation and declaration provided the contractor submits a statement to the homeowner stating that the homeowner is responsible for paying the withholding amount. The statement also stipulated that the contractor’s waiver of the deducted amount or filing a lawsuit with false information is considered a felony. It will also offer a cap-only discount for new policies.

  • High-risk properties directly to the E&S market. Properties that are at high risk because of the location or because their construction is not artificially resistant to storms should not be supported by the broader market. In California, which has homeowners insurance issues from wildfires, the size of E&S’ homeowner premiums tripled Since 2018.
  • Abolition of attorney fees in one direction. Appointed claimants in the form of service providers who repair approximately one insured damage account Third of lawsuits filed against insurance companies. There is a high degree of concentration in a few plaintiff attorney firms.
  • Submit call fee. An inmate’s fee is an attorney’s fee computed by multiplying a reasonable number of hours spent on the case by a reasonable rate. law Project (SB 1910) to achieve this reform in 2022, but he died in the Banking and Insurance Commission.
  • Citizens reform. Citizens must have rates that reflect the risks inherent in the property. Citizen rate increases are set artificially to a maximum of 11 percent increase. In the private market, there is no such cap on rate deposits, which provides the actuarial justification for changing the requested rate to the state regulator.

Without a special session focused on addressing Florida’s property insurance problems, it seems likely that the situation will only get worse. June 1 is the date for the renewal of the reinsurance treaties that protect Florida insurers. The expectation is that the reinsurance rate will increase, which will be passed on to homeowners, pushing Florida homeowners’ insurance premium levels to even higher levels of nosebleeds. June 1st is also the official start of the Atlantic hurricane season. If there is a silver lining to this cloud, it is that the additional pain may spur lawmakers to take action, support needed reforms, and do so quickly.

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