Get ready to dig deeper: Despite reforms,
insurers warn consumers that more rate hikes are coming
Article Courtesy of The Sun Sentinel
By Ron Hurtibise
October 26, 2021
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, multiple
officials told state lawmakers during committee hearings in Tallahassee
over the past few weeks. Insurance rates will continue to rise into next
year and the foreseeable future 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 remains be
“There’s no quick fix. It’s going to be a
painful period of time for our marketplace and for our
consumers,” said Insurance Commissioner David Altmaier
during a recent hearing of the Senate Banking and Insurance
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
re-elected 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.”
Instead, legislators are expected to take a wait-and-see
approach for financial data that will reveal whether reforms
that took effect on July 1 are beginning to quell what
state-owned 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
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
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.
While not catastrophic, Hurricane Irma in 2017 helped
plunge Florida-based private-market insurance companies into a "sea
of red ink," insurance officials told legislative committees. That
red ink has led to bewildering rate increases across the state that
show little signs of stabilizing in the near future.
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
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
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 hearing Wednesday
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
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
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 to take effect
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
Typically, it takes 18 months to 24 months to notice effects of changes
to state insurance laws, officials say. That’s 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.
Senate Banking and Insurance Committee chairman Sen. Jim Boyd, a
Tampa-area Republican, said he’s open to finding new language that would
restrict fraudulent solicitations while withstanding a legal challenge.
“There’s got to be a way that we [create a law] that keeps fraudulent
actors from fraudulently acting,” he said.
Even if no major reforms are expected this year, lawmakers will likely
consider smaller measures intended to strengthen the industry’s
financial health, experts said.
To quell the growth of Citizens and coax its policies back into the
private market, the company might ask for a bill that would restrict
customers’ ability to veto efforts by private-market insurers to remove
or “take out” the policy from Citizens.
Currently, “take-out” targets can veto the move. Citizens proposes
limiting that veto power only to policyholders whose rates would
increase under the new company by 15% or 20%.
Another possibility to downsize Citizens would be to simply allow the
company to raise its rates close to what private insurers charge. A 10%
annual rate-hike cap, enacted after the 2004-05 hurricane seasons, has
kept the state-run company’s rates too attractive compared to
Lawmakers last year allowed that 10% cap to increase by 1% over each of
the next five years. Steeper rate hikes might be necessary to chase
consumers out of Citizens but now is not the time to do it, Gilway said,
because many homeowners would have no other insurance options.
Federal Association of Insurance Reform, a Fort Lauderdale-based
watchdog group, is asking lawmakers to support a bill that would make it
easier for companies to tap into the $15 billion Florida Hurricane
Catastrophe Fund if necessary.
Reducing the amount of losses — from $8.8 billion to $4.5 billion — that
the insurance industry must suffer before being allowed to tap into the
fund would reduce the amount of reinsurance companies must buy. Insurers
could then pass those savings onto their policyholders, association
president Paul Handerhan said in an interview.
Lawmakers might also be willing to revise language in a reform bill
enacted in 2019 restricting use of third-party claims assignments, also
known as assignment of benefits.
Those reforms followed years of complaints about contractors who
convinced policyholders to sign over their rights to bill their insurers
as a condition of commencing needed repairs.
Now, contractors are taking control of claims with similar language
inserted into other documents, called “Direction to Pay” or “Work
Authorization” agreements, said insurance consumer advocate Carter.
Handerhan would like to see lawmakers close that loophole by making
assignment-of-benefits restrictions applicable to all documents that
contractors ask policyholders to sign.
Attorneys who represent policyholders in disputes with insurance
companies, however, say that any reforms should be focused on making
insurers pay claims more quickly, and not on restricting policyholders’
abilities to sue.
Although no bills have been filed that would further restrict attorneys
fees, Any Boggs, property insurance chair for the Florida Justice
Association, warned in an emailed statement that further fee
restrictions will not fix Florida’s “broken” insurance system.
Boggs called on lawmakers to “require accountability” from insurers,
including “disclosing data that impact rate-making decisions” and
requiring insurers to “promptly and efficiently settle legitimate
Saying that rates “have not and will not go down with attorney fee
reform,” Boggs wrote, “Year after year we see an endless stream of big
insurance companies consistently being slow to pay or flat out denying
legitimate claims.” Efforts to limit attorney fees “are nothing more
than an attempt by big corporations with deep pockets to protect their
bottom line and limit consumers’ access to the courts.”
Florida’s 2022 legislative season is scheduled to begin on Jan. 11 and
conclude on March 11.