Insurance Journal 2-part series
In a 2-part series by Amy O’Connor the Insurance Journal outlines what it sees as crisis-mode for Florida’s property insurance market.
Part 1 begins, “After years of warnings that the Florida property insurance market was heading towards an availability crisis, many in the industry say the moment of reckoning has arrived. They blame unchecked claims litigation from non-catastrophe water losses and rising reinsurance rates that have severely strained the financials of Florida insurers.”
- Nearly 60 Florida carriers suffered a combined $701 million in losses and $351 million in negative income for all of 2019. In the first half of 2020 they’ve lost $501 million in underwriting losses and $227 million of negative net income. Some carriers are requesting rate increases of over 30% to cover these losses.
- A number of major catastrophes and litigation from non-catastrophic water damage losses have driven these losses. Insurance reforms passed by the Florida legislature in 2019 were helpful in reducing some of these lawsuits, but the state’s one-way attorney fee statute and contingency fee multiplier incentivize lawsuits. In the first 6 months of 2020, 25 attorneys have filed 20,000 lawsuits.
- Reinsurance rates increases to the carriers have averaged 25% to 30% up to 50%. Reinsurers handle risks that are too large for insurance companies to handle on their own and make it possible for insurers to obtain more business than they would otherwise be able to. As a result the carriers cannot write new business and they’re passing on the increases to their renewal policies. Think of it as insurance for insurance companies.
- The impact of some carriers leaving the Florida market means Citizens Property Insurance Corp. grows. With Citizens’ having a 10% glidepath–meaning rate increases each year are limited to no more than 10%–the so-called “insurer of last resort” will have to pass on the expense to policyholders in the form of assessments, should losses merit them.
- Florida State Senator Jeff Brandes (R-Pinellas County) seeks “to put the Florida insurance market on a sustainable path.” Sen. Brandes requested a study on the Florida Insurance Market that will be completed next month.
- Sen. Brandes would also like to see Citizens’ 10% glide path eliminated for new policyholders.
- The Florida Office of Insurance Regulation (OIR) issued a data call to track the effect of the 2019 Assignment of Benefits (AOB) law. Additionally the OIR is analyzing insurer holding company affiliates to better monitor insurers doing business in Florida and to protect consumers.
- Sen. Brandes and other stakeholders are looking towards legislation similar to laws passed in Texas to address lawsuit abuse. Ultimately the goal of any legislation according to Brandes is “that (it) protects both the consumer and ensures that we can move away from these radical rate increases…”
- Agents are encouraged to reach out to their state Senators and Representatives to share their stories about the lawsuits driving up the rates.