The Florida property insurance market will take some time to turn around

This article represents the opinion of the Tampa Bay Times editorial board.

Lawmakers are at it again, trying to fix the state’s troubled property insurance market. And again, don’t expect much debate or much eureka! Moments as they meet in a special session this week. The “corrections” are already available. The House and Senate begin with near-identical bills, a strong indication that there won’t be many substantive changes to what Republican Party leaders have already decided is the best way forward. The only thing businesses and homeowners should expect is lower interest rates.

This is not a blanket indictment of the proposed changes. Some have potential. Others amplify similar changes that have been made in recent years. But even with the changes, very few insiders expect property insurance rates to go down for most people. In fact, it’s a solid bet they’ll go up — maybe a lot. The most optimistic view is that it will take “years” for the market to stabilize. It turns out that paradise is difficult to insure.

Every Florida resident knows that the state hangs like a thumb-shaped piñata from the southern United States, just begging to be hit by hurricanes. Insurance managers lose their sleep considering the risk associated with a Category 5 storm hitting Miami or Tampa Bay. Climate change is unlikely to help, nor will our eagerness to build along our shores.

But in recent years, insurance providers and some legislators have pointed to roof replacement schemes and the resulting lawsuits as the main cause of skyrocketing prices. Too many homeowners, they say, have used the current system to get new roofs when the roofs were just worn and not significantly damaged. Florida is the nation’s leader in property insurance litigation, many of which in recent years have focused on whether insurance companies should pay the full cost of replacing an older roof.

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The systems have often been labeled “fraudulent,” although state and local law enforcement have made very few arrests (and the proposed law does not appear to allocate additional money or resources to investigate fraudulent claims). Insurance companies say they feel compelled to settle many of the claims to avoid larger payouts, which are padded by exorbitant plaintiffs’ attorneys’ fees. In many cases, the homeowner’s attorneys get paid more than their clients, sometimes ten times as much.

The bill includes provisions that proponents say would limit litigation in two ways: 1. End the practice of policyholders subcontracting their benefits to contractors who demand payments from insurers. Earlier this year, lawmakers trimmed what’s often referred to as “attribution of benefits,” but this bill would go deeper. 2. Eliminate the requirement for property insurers to pay attorneys’ fees from policyholders who win claims actions – sometimes referred to as “one-way” fees. The double win will leave more homeowners to fend for themselves, a clear benefit for insurance companies in the legal arena.

If the bill is passed, we should know soon enough just how much of a role the twin bogeymen of “benefit allocation” and “exorbitant attorney’s fees” played in the rate hikes. Will legal fees go down and insurance companies pass those savings on to policyholders? Or is this just a big giveaway to the insurance industry? Stay tuned in, although we’d advise against holding your breath.

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The 123-page bill would also:

  • Reduce the time it takes to file and process claims. Homeowners would have one year to file a claim instead of two years. Insurers would have 60 days to grant or deny a claim instead of 90, with an additional 30 days after a hurricane or other natural disaster.
  • Allow insurers to write lower-cost policies that require mandatory binding arbitration to resolve disputes, another way to reduce litigation and attorney fees.
  • Requires policyholders with state-run Citizens Property Insurance to purchase flood insurance from the National Flood Insurance Program or a private insurer. In addition, Citizens policyholders could not renew their coverage if they received policy quotes from private insurers that were within 20% of the cost of Citizens premiums. The idea is to bring more Citizens customers back to private insurers, which in turn reduces government risk and strengthens the private market. At least that is the hope.
  • Creates a $1 billion taxpayer-funded program to provide reinsurance. Insurance has become more expensive for insurers in recent years and is expected to become even more so after Hurricanes Ian and Nicole. The idea is to use $1 billion to cushion those costs and put Florida’s insurers on a better financial footing. But how wise is it to use taxpayers’ money to support companies that are sometimes badly run?
  • Give the Office of Insurance Regulation broader powers to investigate insurers’ practices.
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Overall, the changes are far-reaching and more definitive than some previous attempts to address runaway insurance rates. However, most prefer the insurance companies, which are often criticized for crying themselves down but refusing to give out financial and other data.

Shame on homeowners who have to take on insurance that denies legitimate claims. You will have fewer arrows to fight against the legion of insurance lawyers. Unfortunately, that’s exactly what happens when a system is put in place that allows for too much abuse — homeowners fumbling for a new roof, attorneys looking for big payouts, insurers denying legitimate claims. After all, insurance is designed to mitigate risk, not to guarantee everything that wears out or ages in a home.

Don’t think of these changes as quick fixes if they end up fixing much at all. The state’s insurance market remains in too much disarray, with too many insurance companies going bust and too many homeowners gasping at the sight of their annual premiums, to change overnight. In the immediate future, success would mean things don’t get any worse.

Editorials are the institutional voice of the Tampa Bay Times. The members of the Editorial Board are Editorial Editor Graham Brink, Sherri Day, Sebastian Dortch, John Hill, Jim Verhulst and Chairman and CEO Conan Gallaty. consequences @TBTimes_Opinion on Twitter for more opinion updates.

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