PROPERTY INSURANCE REFORMS PASSED BY FLORIDA LEGISLATURE DON’T INCLUDE RATE DROPS

Branches and leaves line the streets in Key Largo after Tropical Storm ETA. TIFFANY DUONG/Keys Weekly

Florida legislators passed an array of reforms to the state’s crumbling homeowner’s insurance industry during a special session in Tallahassee that began Dec. 12. It’s the second time this year that state senators and House members were called back to the state’s capital to address the insurance market that’s seen seven carriers going insolvent and no longer conducting business, leaving many policyholders in a bind. 

Following lengthy discussion over a two-day period, members in the Florida House voted 84-33 on legislation, while senators also passed the bill via a 27-13 vote on Dec. 14. 

Republican leaders who helped draft the bill, which was submitted to the House and Senate on Dec. 9, say it builds on the consumer-friendly property insurance market that offers homeowners the opportunity to shop for insurance that meets their budget. Reforms in the bill also address the amount of money that flows into the pockets of attorneys, while another sets new eligibility requirements to move policyholders off an insurance carrier of last resort, Citizens, to the private market. But critics said the proposal does nothing to help homeowners keep money in their pockets, as it didn’t address rate decreases.

Legislation adds new eligibility requirements to acquire a policy through Citizens, which writes policies for residential properties and commercial structures. Citizens covers eligible Florida property owners who are unable to find insurance coverage in the private market. 

Citizens’ eligibility examines the value of property insured and location of the property. Per legislation, commercial or residential policyholders with Citizens wouldn’t be able to renew their policies if a private insurer offers them a premium that’s within 20% of their Citizens premium. 

“If you’re with Citizens and you pay $100 for a premium, if a private insurer comes and says, ‘We can do that for $119,’ you have to move to the private option,” said state Sen. Jim Boyd, who presented the bill. 

Citizens’ rates were frozen at the level established in 2006 between 2007 and 2010. By 2010, a glidepath set by the legislature saw annual rate increases that didn’t exceed 10% above the previous year for any individual policyholder. State officials said the glidepath didn’t close the gap between Citizens and private market rates. Instead, the rate cap and increasing private property insurance rates created a growing gap, making Citizens a competitor in the private market as opposed to being an insurer of last resort. By 2021, state legislators revised the glidepath to increase it 1 percent per year to 15% by 2026 and following years. 

Boyd said Citizens rates are typically 30% lower than private market rates. More than 1 million homeowners in Florida are insured through Citizens. That’s up from the 474,000 policies written by Citizens in June 2020. 

Current law doesn’t force Citizens residential policyholders to obtain flood insurance as a condition of coverage. But that’ll change under the new proposal, which requires Citizens policyholders to acquire flood insurance that is at least equivalent to National Flood Insurance Policy coverage. 

New Citizens policyholders with property located in the special flood hazard area must have flood coverage by April 2023, while renewals must have flood coverage by June 2023. All other policyholders must have flood coverage for policies by the following dates: Jan. 1, 2024 for property valued at $600,000 or more; Jan. 1, 2025 for property valued $500,000 or more; Jan. 1, 2026 for property valued at $400,000 or more and Jan. 1, 2027 for all other personal lines property insured by Citizens. 

Mel Montagne, president of Fair Insurance Rates in Monroe (FIRM), said the state is trying to operate Citizens as a normal insurance company, when in fact it’s a state-owned nonprofit that’s paid by Florida taxpayers that should only provide wind coverage. 

“My whole contention with Citizens for years has been why have you deviated from the prime directive? It was created to provide wind coverage in Monroe County. Nowhere in this legislation gets Citizens back to what it was created for.

Issues over insurance companies going insolvent drew Gov. Ron DeSantis to call a special session in May. In two days, legislators in the House and Senate approved a bill that cracked down on fraudulent roof claims and created a $2-billion program for insurers to purchase insurance to insulate them from risk. Legislators who were opposed to the bill believed Florida policyholders weren’t getting the necessary relief, but rather insurance industries. Those in favor, including Rep. Jim Mooney, said it was only the first step to stabilize the market. 

A series of changes in the bill encourage property insurers to settle claims in a timely fashion. Per the bill, insurers would need to acknowledge a claim or respond to communication within seven days. Insurers currently have 14 days. Insurers would also need to conduct a physical inspection for all claims, including those unrelated to hurricanes, within 30 days as opposed to the current 45 days. 

Insurers would need to pay or deny a claim in 60 days as opposed to the current 90 days. There is an exception, however, if the state Office of Insurance Regulation (OIR) issues an order finding the delay is caused by factors beyond the insurer’s control. 

“If there’s a state of emergency and the carrier goes through OIR and OIR approves, there’s an opportunity to extend that another 30 days,” said Boyd, who discussed the bill on the Senate floor on Dec. 13. 

Legislation also creates a $1-billion program for property insurers to purchase optional hurricane reinsurance at near market rates. Funds for the program, known as the Florida Optional Reinsurance Assistance (FORA), would be funded by general revenue for the 2023 year and premiums paid by insurers. Boyd said a shrinking reinsurance market puts pressure on carriers that provide coverage to residents. 

Proponents of the bill point to litigation as a key factor in rising premiums. The proposal eliminates incentive to file suit unnecessarily in an effort to seek attorney fees. Supporters say it could result in a decrease in litigation and costs related to property insurance claims. 

“Recognizing that in 2021, 76% of the nationwide homeowners’ lawsuits were opened in Florida, while we accounted for only 6.91% of total nationwide claims, the bill makes further efforts to reduce frivolous litigation that raises costs, and increases insurer transparency to improve the marketplace for consumers,” Republican Senate President Kathleen Passidomo stated in a memo to fellow senators. 

Speaking in favor of the bill, Florida Chief Financial Officer Jimmy Patronis told House Appropriations Committee members that the state cannot have a normal functioning insurance market with that amount of litigation. 

“It makes it hard for insurance companies to remain in Florida,” he said. 

State Sen. Jason Pizzo said the main drive behind legislation revolves around attorney fees which are driving up rate premiums. But he criticized Boyd for not having specific, independent information on the number of claims that led to lawsuits. 

“This entire bill is based on things told to us and to you that aren’t verifiable,” Pizzo said. “What data have you been provided that lawsuits are rampant and they’re driving up premium costs? What data do you have that the public can see?”

Boyd referred to the National Association of Insurance Commissioners, which states that nearly 77% of lawsuits come from Florida. 

“That’s pretty telling,” he said. 

While many point to fraud and litigation as some of the main reasons for rate increases and losses, the American Policyholder Association found a number of property insurance companies in Florida pay their executives in the tens of millions of dollars. In some instances, Florida insurance CEOs were paid more than the top executives at AllState, Progressive and Travelers. 

David Altmaier, insurance commissioner, said he believes the proposal brought forth by Republicans will lower rate increases for policyholders, but he acknowledged that it will take some time.

State Sen. Ana Maria Rodriguez, who represents the Keys and portions of Miami-Dade, threw her support behind the bill. 

“This legislation is absolutely essential if we are going to start attracting private insurance and reinsurance capital back to Florida, which will give consumers more property insurance choices and access to more competitive rates,” she said.

State Rep. Jim Mooney also threw his support behind legislation. He said the bill addressed a large component that plagued the insurance industry, and that’s frivolous lawsuits. 

“At the end of the day, we’re taking attorneys fees out. It really puts the onus on the insurance companies to do something correct.”

Mooney also applauded a component of the bill that also addressed some issues with the assignment of benefits.

“There are people who come in within hours of a storm being over. They’re predatory and catch you when you’re most vulnerable as your roof’s gone and you’re feeling like the world’s coming to an end. They tell people ‘Let me show you how I can make this better.’ The person signs over the benefits and that person disappears.”

Jim McCarthy is one of the many Western New Yorkers who escaped the snow and frigid temperatures for warm living by the water. A former crime & court reporter and city editor for two Western New York newspapers, Jim has been honing his craft since he graduated from St. Bonaventure University in 2014. In his 4-plus years in the Keys, Jim has enjoyed connecting with the community. “One of my college professors would always preach to be curious,” he said. “Behind every person is a story that’s unique to them, and one worth telling. As writers, we are the ones who paint the pictures in the readers minds of the emotions, the struggles and the triumphs.” Jim is past president of the Key Largo Sunset Rotary Club, which is composed of energetic members who serve the community’s youth and older populations. Jim is a sports fanatic who loves to watch football, hockey, mixed martial arts and golf. He also enjoys time with family and his new baby boy, Lucas, who arrived Oct. 4, 2022.