Florida property insurance market on disastrous path
Nine Florida home insurance carriers have been declared insolvent in the past two years. Six of these nine have fallen victim to an unhealthy market since March 2022. Twenty-seven Florida property insurance companies were threatened with a financial downgrade in August 2022. The average home insurance premium in Florida is now $4,231, according to the Insurance Information Institute, skyrocketing above the national average of $1,544.
These rates are not lining the pockets of the insurance companies, which are struggling to just break even. Rather a collection of lawsuit factories throughout our state is laughing all the way to the bank. Florida’s geographical proximity to hurricanes makes it no surprise that with 6.5 percent of the U.S. population residing in Florida we have 9 percent of the nation’s property insurance claims. Yet, according to Florida’s Office of Insurance Regulation, we account for 79 percent of the nation’s property claims-related lawsuits.
Gov. DeSantis has called for the Florida Legislature to return to Tallahassee this month for a special session to address this crisis. Meaningful reform is needed to strengthen the market before all the home insurance carriers are gone and we are left with only Citizens (the state-created insurer of last resort). The following reforms are needed:
1. Repeal the one-way attorney fee statute: If, upon suing an insurance company, a homeowner is awarded $1 more than their last pretrial offer, the homeowner will be compensated for all attorney fees at the insurance company’s expense. If, on the other hand, the homeowner does not prevail they are still not responsible for legal fees. This statute has proven to be an open invitation to file lawsuits.
2. Address the fallout caused by the 2016 Florida Supreme Court Sebo ruling: When two or more perils converge to cause a loss, and at least one peril is not covered by the policy, the insurance carrier is required to cover all the damages. This is especially popular with roofers inspecting an old roof with significant wear and tear (not covered) and finding a small amount of wind damage (covered) in order to get an entire roof for free at the expense of the insurance company. Free roofs raise homeowner’s premiums.
3. Allow home insurance companies the option to offer a roof value schedule in their policies. Cars, boats and motorcycles all depreciate due to age and condition. This is taken into consideration when their value is calculated at the time of a loss. Not allowing home insurance companies this same measurement of value for a roof leaves no skin in the game for the homeowner.
Until the issues above are dealt with by our Legislature, home insurance companies must continue to restrict capacity for new policies or leave the state entirely, with some being declared insolvent. There will be no incentive for new companies to bring their business and healthy competition to Florida. I encourage you to reach out to your legislators, House Speaker Paul Renner and Senate President Kathleen Passidomo and share your thoughts on these proposed reforms to fix this crisis.
Andy Koehneke has nearly 20 years of property and casualty insurance experience in Southwest Florida where he serves currently as the managing partner of Insurance Specialists of SW Florida. Andy, his wife, Sarah, and their three children, currently live in Naples and spend summers in Ohio.
This article originally appeared on Fort Myers News-Press: Florida property insurance market on disastrous path
