The Real Reason Florida’s Auto Insurance Policies are the Most Expensive
Bottom Line: In Florida we’re accustomed to leading the country in a lot of ways. Most of the categories (net migration, economic growth, job growth), are positive ones. One of them in particular isn’t. As the highest risk state in the country for natural disasters, aided by most of the country’s property insurance lawsuits, Florida has long had the most expensive property insurance rates in the country. The state legislature has been aggressively addressing Florida’s property insurance crisis through policy aimed at significantly curbing lawsuits which have significantly driven up the costs of policies. As Florida’s comprehensive auto insurance policies have now reached the price of Florida’s property insurance policies about a decade ago, it appears a different version of a similar thing is at play.
It’s logical to think that the reason why Florida would have the most expensive auto insurance policies in the country is because we have the highest rate of claims. We don’t. According to data from the Insurance Institute, while Florida has well above average accident claim rates, we’re third for overall auto claims. A new Bankrate.com analysis found Florida’s average auto insurance premium is now $3,183 for comprehensive coverage – 37% higher than the national average and, as mentioned, the most expensive in the country. The reason we’re third for claims but with the most expensive auto insurance rates once again comes down to litigation.
By the numbers...
- Florida’s accident frequency: 10% higher than the national average
- Cost of repairs are 7% lower than the national average
- Injury claim litigation – 38% higher than the national average
- Fraud: 84% higher than the national average
It’s rather obvious what the biggest issue is with Florida’s rapidly rising auto insurance premiums. Much like Florida’s property insurance crisis, fraud and litigation are overwhelmingly to blame. The better news is that the Florida legislature passed two related reforms in this year’s session which have the potential to significantly address those two issues. Litigation reform through the Civil Remedies bill – which will crack down on frivolous lawsuits and predatory practices of trial attorneys by reforming the fee structure, while also preventing lawsuits to be filed when the person involved is more at fault for the matter. The other policy change was the banning of the assignment of benefits for windshield repairs – which has been the most common catalyst for insurance fraud. While we’ve been conditioned that the property insurance reforms will take years to fully address the extent of Florida’s property insurance litigation crisis, there’s reason for hope that Florida’s auto insurance situation could begin to improve much more quickly. Let’s hope that’s the case.