Despite Florida reforms, insurers warn of coming home rate hikes
Florida homeowners hoping for an end to steep property insurance rate increases next year might as well start looking for other expenses to trim. It’s not happening.
Costs won’t be stabilizing or going down anytime soon, officials told state lawmakers during committee hearings in Tallahassee over the past few weeks. Insurance rates will continue to rise into next year and beyond as insurers continue to deal with mounting losses from fraudulent claims and litigation, they said. Whether reforms enacted last spring will help turn the tide is unclear.
“There’s no quick fix,” said insurance Commissioner David Altmaier during a recent hearing of the Senate Banking and Insurance Committee. “It’s going to be a painful period of time for our marketplace and for our consumers.”
What’s more, industry experts say there’s little chance that lawmakers will have an appetite for bold proposals aimed at bringing down costs during the upcoming legislative session that begins in January.
Lawmakers will be more focused on redistricting and getting reelected next fall, said Dulce Suarez-Resnick, vice president of the Miami-based agency Accentria Insurance.
“I don’t think they’re going to do anything that could lose them votes or support,” she said.”
Instead, legislators are expected to take a wait-and-see approach for financial data that will reveal whether reforms that took effect July 1 are beginning to quell what stateowned Citizens Property Insurance Corp. President and CEO Barry Gilway called “a sea of red ink” among 52 private-market insurers that oversee 79% of policies in the state. Total combined losses reported by those 52 companies have increased each of the past four years — from $88.7 million in 2017 to $828.6 million in 2020 — and are on track this year to exceed $1 billion, according to data from S&P Global Market Intelligence that Gilway presented to the committee.
Homeowner insurance rates in Florida have been steadily rising since Hurricane Irma barreled through most of the state in 2017. Damages from Irma, estimated a few months after the storm as totaling $9.7 billion, nearly doubled to $17.4 billion by January 2020, thanks to protracted litigation and late filing of claims, insurers said. Costs from Irma continue to mount, Gilway said.
As damage costs increased, so did the cost of reinsurance — which is insurance that insurers have to pay to make sure they can cover claims after future storms. Those cost increases, of course, are passed along to consumers.
Customers of Fort Lauderdale-based Universal Property & Casualty, the state’s largest private market insurer, are paying 31% more for coverage than they were two years ago. Heritage Property & Casualty customers saw their rates increase 24% since 2020, while FedNat customers are paying 25% more.
Florida has the nation’s third-highest property insurance rates in the U.S., with an average annual premium of more than $3,600, said Tasha Carter, the state’s insurance consumer advocate, in a recent hearing of the House Subcommittee on Insurance and Banking.
Lucky to have insurance?
Still, some insurers say homeowners who still have private market insurance should consider themselves lucky despite the steep rate increases. At least some company is willing to insure them.
Thousands of homeowners have seen their policies canceled or non-renewed even if they haven’t filed a single claim. Others are being told to replace their roofs if they want their insurer to renew their policies. Several companies are refusing to insure homeowners
with older homes or roofs older than 10 years, Gilway said.
Florida’s insurance industry, he said, is “on life support.” Insurers have only three options to stay alive:
Find capital investors to pump more money into their companies. Gilway said investment capital is “almost impossible” to secure right now.
Reduce the number of policies they write to ensure they don’t carry more risk than they can pay for after a catastrophe.
Raise rates to try to stay ahead of mounting costs from claims and litigation.
Two companies went out of business over the past year and four others were required by state insurance regulators to drop thousands of policies to remain solvent.
The Office of Insurance Regulation is currently requiring 12 companies to submit monthly financial reports so regulators can quickly recognize signs that they may be approaching insolvency, Altmaier said.
One or two of them are receiving “extra close” scrutiny. He did not name the troubled companies.
Citizens Property Insurance Corp., the so-called “insurer of last resort,” is averaging 5,000 new policies a week and is expected to top 1 million next year. Currently, property owners can qualify for Citizens insurance if no private market insurer is willing to cover them, or if the only offers they get exceed Citizens’ price by 20% or more.
Waiting for reforms
Still, Altmaier, Gilway and others say they are hopeful that costs of claims and litigation have started to level off since reforms enacted last spring took effect.
That might be already happening. After increasing in July, the number of lawsuits filed against all property insurers declined in August and September.
Typically, it takes 18 months to 24 months to notice the effects of changes to state insurance laws, officials say, because consumers’ policies are updated to reflect changes only when they renew their policies each year. Reforms enacted last spring included:
A change in how attorneys get paid meant to reduce incentives for some law firms to file hundreds of suits.
Insurers must get a 10-day notice of intention to file suit. This is meant to give insurers an incentive to resolve disagreements before they go to court.
Deadlines for filing claims after hurricanes were reduced from three years to two years.
Policyholders have 10 days to cancel public adjuster contracts. This also gives insurers time to resolve conflicts. Insurers claim some crooked public adjusters lead insurers to sign contracts with costly contractors and attorneys.
The reforms also included language barring roofing contractors from using “prohibited advertisements” to solicit homeowners to file damage claims, or acting as public adjusters by inspecting damage to determine whether it could be covered by insurance.
But a federal judge in July struck down the ban on “prohibited advertisements” — which could include door hangars, flyers or pamphlets. That part of the ban violated free commercial speech rights, the judge said.
Insurers sought the ban to quell what they call out-of-control solicitations by roofing companies that include offering cash bonuses to homeowners willing to let them inspect their roofs. Once up there, shady roofers “find” damage, then look back through old news reports to find severe storms to blame, insurers say.
If the roofer can demonstrate that at least 25% of a roof is damaged, state building codes require full roof replacement. Roofers have extracted millions of dollars from insurance companies using billboards, websites and other ads to woo homeowners with promises of new “free” roofs, insurers say.