Florida State Senators Approve Property Insurance Bill

On Tuesday, the Florida Senate approved broad legislation to overhaul the state's property insurance system.

Source: AP | Published on December 14, 2022

Strong building codes

On Tuesday, the Florida Senate approved broad legislation to overhaul the state’s property insurance system, which has struggled due to insolvencies, high costs, and major storms.

The bill would establish a $1 billion reinsurance fund, lower litigation costs, and require some customers to leave a state-created insurer. It would also compel insurers to respond to claims more quickly and increase state oversight of insurers’ actions in the aftermath of hurricanes.

The Republican proposal was made during the GOP-led Legislature’s second special session of the year, with the goal of stabilizing the state’s property insurance market.

The measure is expected to be passed by the state House this week.

Florida has struggled to keep insurers and control rising property insurance costs in a market where natural disasters weigh heavily on the cost of doing business. The meeting comes after Hurricane Ian slammed into the southwest coast in late September, causing insured losses ranging from $40 billion to $70 billion.

Democrats have criticized the bill, which builds on insurance legislation passed in May, for not immediately lowering policyholder rates. Supporters of the bill argue that it is intended to stabilize the market, which could lead to lower interest rates in the future.

“As we look forward, and as these reforms take effect and work their way through the ratemaking process, I absolutely believe it will drive down their costs,” said Republican state Sen. Jim Boyd, the bill’s sponsor. “While it may not happen today, I am confident that we will have rate relief in the future.”

In Florida, average annual premiums have risen to more than $4,200, more than tripling the national average. According to the Insurance Information Institute, a research organization funded by the insurance industry, approximately 12% of homeowners in the state do not have property insurance, compared to the national average of 5%.

“Florida homeowners are being crushed right now by the cost of housing, and insurance costs are a big part of that,” Democratic state Sen. Darryl Rouson said. “Any action that does not address the consumer’s insecurity and costs, as well as provide meaningful near-term relief for policyholders, I believe falls short of our objectives.”

Senate Democrats introduced a slew of amendments to the bill and peppered Boyd with detailed questions about the state of the insurance market, insurance litigation, and other aspects of the complicated proposal.

Following several hours of debate, Republicans rejected the Democratic amendments and eventually approved the legislation.

In Florida, the insurance industry has seen two years in a row with net underwriting losses exceeding $1 billion. Six insurers have declared bankruptcy this year, and others are leaving the state.

According to the insurance industry, litigation is partly to blame. According to a spokesman for the Insurance Information Institute, loopholes in Florida law, such as fee multipliers that allow attorneys to collect higher fees for property insurance cases, have made Florida an excessively litigious state.

According to the Florida Office of Insurance Regulation, the state accounts for 76% of all homeowners insurance lawsuits in the country but only 9% of all homeowners insurance claims.

The bill would eliminate “one-way” attorney fees for property insurance, which require property insurers to pay the attorney fees of policyholders who successfully sue over claims while exempting policyholders from paying insurers’ attorney fees when they lose.

Attorneys’ groups have argued that the insurance industry is to blame for refusing to pay claims and that policyholders should only sue as a last resort. Arbitration, they argue, is biased in favor of insurance companies.

“Does the solution punish the people of Florida? “Unless they’re independently wealthy, they’re not going to have any chance to oppose an insurance company’s decision,” Ron Haynes, a Tampa attorney representing the Florida Justice Association, told the House Appropriations Committee. “Insurance should be a blanket of protection, not a suffocating blanket.”

The bill would allocate $1 billion in taxpayer funds to a program that would provide carriers with hurricane reinsurance, which is coverage purchased to help ensure that claims are paid. In a market where companies have complained about rising costs, it would offer “reasonable” rates.

The proposal will also expedite the claims process and repeal the state’s assignment of benefits laws, which require property owners to sign over their claims to contractors, who then handle insurance company proceedings.

“This is historic legislation. Indeed, it is the most comprehensive insurance reform package proposed in Florida,” said Mark Friedlander, a spokesman for the Insurance Information Institute. He referred to litigation abuse and benefit assignment abuse as the “root causes of Florida’s property insurance crisis.”

The state’s unstable insurance environment has pushed homeowners unable to obtain private coverage to Citizens Property Insurance, the state’s public insurer of last resort, which this summer surpassed 1 million policies for the first time in nearly a decade.

The bill would require Citizens policyholders to pay for flood insurance and would require them to switch to private insurers if they offered a policy that was up to 20% more expensive than Citizens.

“In my opinion, we have an overall bill here that is absolutely historic,” said Barry Gilway, Citizens president, CEO, and executive director. “It marks the beginning of a major shift in Florida’s property insurance market. It will entice capital to return to the Florida market. It will not happen overnight, but it will happen much sooner than most people believe.”

Separate bills are expected to be passed this week by lawmakers to provide property tax relief to people whose homes and businesses were rendered uninhabitable by Ian and to provide 50% refunds to commuters who pay more than 35 highway tolls in a month with a transponder.