Don’t expect miracles from a special session on home insurance

Florida needs to fix its homeowners insurance crisis. Homeowners are looking for much higher rates, while too many insurance companies close or drop coverage. So first, shout out to Republican Sen. Jeff Brandes of St. Petersburg for trying to get his fellow legislators to come together in a special session to address the issue. And good to Governor Ron DeSantis for supporting the effort. But the governor is right when he says the session will be a waste unless lawmakers have a solid, workable plan. They will do it? Homeowners across the state are waiting for the answer to that question.

The average Florida homeowner pays $3,600 a year for property insurance, not including flood coverage, according to data compiled by the Insurance Information Institute, a nonpartisan trade group. That compares to $1,400 for the rest of the country. And annual rates are going up for many property owners. Last year, rates increased by double digits on average. This year, industry experts said Florida homeowners shouldn’t be surprised to see their rates go up another 30 percent, or more.

Two insurance companies have already gone bankrupt since Jan. 1, and another five or six are floundering, said Mark Friedlander, director of corporate communications for the Insurance Information Institute. Other companies have dumped tens of thousands of policies in an effort to limit their financial risk. Florida property insurance providers posted just over $1 billion in net losses last year, according to data from S&P Global Market Intelligence. The state’s faltering insurance market has turned homeowners to Citizens Property Insurance Corp., the state-owned insurer originally created as a last resort for Floridians in need of coverage. The number of Citizens policies has skyrocketed in recent years from 446,327 on March 31, 2020 to more than 818,000 today. The corporation added 25,000 new policies in March alone and is heading north of 1 million by the end of the year. The influx adds to Citizen’s financial exposure, and by extension, taxpayer exposure, if a major hurricane hits one of the state’s densely populated cities.

Florida has built many homes and businesses in many vulnerable places, particularly along the coast. That leaves wide swaths of homes severely exposed to hurricanes and other natural disasters, making them more expensive to insure. The rising cost of materials and labor required to repair and replace damaged homes has also played a role in increasing insurance rates. But insurance providers say another factor has infected the Florida market: roof replacement schemes and the resulting litigation. Florida leads the nation in lawsuits related to property insurance disputes, many of them in recent years centered on whether insurance companies should pay the full cost of replacing an old roof.

Roofing companies go door to door telling homeowners that their insurance can replace all of the old roof, and if the insurance company denies the claim, the homeowner can go to court. Insurance companies say they feel compelled to settle many of the claims to avoid larger payouts augmented by plaintiffs’ exorbitant attorneys’ fees. Insurance is supposed to mitigate risks, not act as a guarantee against everything that wears out or ages in a house. Resolving so many legal claims raises fees. It also leads companies to abandon their policies. Progressive Insurance recently eliminated approximately 56,000 policies on homes with roofs over 15 years old.

Previous solutions

Last year, lawmakers passed a bill to help reduce some of the questionable claims, including reducing the time homeowners have to file a claim from three to two years. The reforms also prohibited roofers from soliciting homeowners to file roof damage claims using “prohibited advertising,” including emails, flyers and door signs. However, a federal judge temporarily blocked part of the law on First Amendment grounds, and the case is still pending. Friedlander described Florida’s insurance problems as man-made. The state hasn’t been hit by a major hurricane in three years, but litigation continues to pile up, he said. “Florida is the most volatile insurance market in the country,” Friedlander said, “and it’s headed for collapse.”

Not everyone agrees with that assessment. Critics say the insurance industry is too quick to siphon off revenue to side businesses and then laments, and is too cautious about releasing financial and other data, some of which is used to calculate rates. of insurance. Some of the companies are not well managed, or good at managing risk, critics say. The system, they say, is tilted toward lining the pockets of insurance executives and that insurance companies too often deny legitimate claims. But whoever is right, the bottom line is that Florida’s already expensive rates are rising.

Now what?

So what should homeowners expect from a special insurance session? A good bet: don’t expect a magic wand. The House and Senate were unable to address the issue during the recently ended legislative session because they were too far apart on possible solutions. The Senate passed a bill (SB 1728) that underscored the theme of the law passed last year that any offer by a contractor to waive or refund a deductible in exchange for being hired to do repairs amounted to fraud. It required contractors to add a disclaimer to ads that made it clear that homeowners were responsible for paying any insurance deductibles.

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