Q&A – What Florida’s Proposed Property Insurance Reform Would Do
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Today’s Entry: Thanks for today's story re. property insurance. Is the legislature making any progress on reforming the litigation issue?
Bottom Line: Today’s note came on the heels of Tuesday’s Q&A discussing the current property insurance crisis in Florida which is rapidly growing. The answer to your question... Thankfully yes, just this week there’s been meaningful movement in the state session regarding insurance reform. While property insurance reform proposals had been filed in both the state House & Senate, they seemingly were stalled until the latest wakeup call last Friday. That being the failure of Florida’s fifth property insurance company in just the last two years – St. Johns – leaving another 160,000 Florida homeowners in a lurch. That was the second dose of dire news for Florida’s property insurance market within just two days last week.
The Insurance Information Institute’s annual analysis estimates the average private property insurance premium for Floridians would need to rise by another 30% on average for the industry to not lose money this year. Florida’s private insurers collectively have lost $4 billion over the past three years which is why five insurers have gone out of business over the past two and more insurers have scaled back on accepting new insurance policies in our state. A 30% increase would represent an average of an additional $1,100 per Florida policy which is already paying the highest average cost for property insurance in the country at $3,600 per year – which is about three times the national average. This one-two punch of bad news for Florida home insurance policy holders seems to have been enough to light a fire under the Legislature to get moving on the previously proposed reforms.
The biggest movement this week has come in the state Senate where they passed a reform measure through its final committee on an 18-2 vote and now it's ready for a full vote before the full Senate. The proposal takes the biggest swings yet at addressing Florida’s biggest issue – which isn’t paying out claims, but rather dealing with our state’s out-of-control legal environment. Last year the Legislature took a crack at it, however the legislation, which was passed, was struck down in court just two weeks after it was signed into law.
The current Senate proposal seeks to avoid potential legal challenges through greater specificity. The legislation also goes further to address issues than last year’s effort. At the crux of Florida’s legal woes have been Floridians abusing the claims process by filing claims as a means of seeking repairs as opposed to having sustained emergency damage, and by third parties using homeowners to game the system and sue insurance companies. Roofs in particular have been front and center with these abuses. The Senate proposal would:
- Mandate that the policy holder be responsible for the full deductible payment (banning third parties from doing so through kickbacks)
- Labeling 3rd party kickbacks to homeowners who file insurance claims as insurance fraud punishable under law as a felony
- Determining that any false information provided to an insurance company as a means of filing a claim is insurance fraud punishable under law as a felony
As I’ve discussed, 77% of the country’s property insurance lawsuits are in Florida. It’s insane and it costs every homeowner, including those who never file claims, huge money. Without any other reforms those measures would likely make a meaningful difference in the current environment. But there’s a lot more to the proposal, including reforms specifically addressing roof issues and repairs based on the age of a home’s roof and whether roof claims are being made on the basis of a hurricane “As defined by the National Hurricane Center” as opposed to some other event. Basically, the legislation streamlines the roof claims process for people filing after hurricanes and raises the threshold for filing claims outside of them. That also has the potential to have a meaningful impact. There are many other reforms proposed within the Senate’s legislation aimed at contractor and attorney behavior when addressing insurance claims. Additionally, there are reforms within state-backed Citizens Insurance as well.
Having studied and covered Florida’s property insurance mess for many years, what’s in the Senate’s proposal would likely be a win for all Floridians who aren’t attempting to game the system. While the legislation is ready for a full Senate vote before the end of the session next week, the outlook in the state House isn’t as clear. First, the House’s companion legislation isn’t as robust as the Senate’s. Second, it hasn’t been advancing at the pace of the Senate’s legislation. There is still time to get this done this session, but not much. It needs to be a priority. This issue is the one I feel the legislature has been most derelict of duty in adequately addressing. Waiting another year isn’t a viable option – which is part of the reason I’ve placed as much attention on it as I have recently. If you’re concerned and want change – you should contact your State Representative at your earliest opportunity and tell them you want the reform and specifically want what’s in the Senate’s proposal.