From The Capitol: Securing Florida Future Through the Right Policy Framework

By: Chad Kunde, Director of Business Climate and Governance Policy, Florida Chamber of Commerce

Governor Ron DeSantis recently announced his intent to call another special session to address Florida’s property insurance crisis. The legislature passed initial reforms during the 2019 and 2021 regular sessions and the 2022 special session; unfortunately, these reforms have not limited litigation driving up insurance rates for Floridians. If there are additional meaningful reforms passed, there are several Florida 2030 Blueprint goals dealing with Florida’s property insurance market that would benefit.

Florida 2030 Blueprint Goal: Legal Climate Improved to Top Quartile in the Nation

National data shows that in 2021, Florida accounted for approximately seven percent of all property insurance claims but accounts for over 76 percent of all homeowners’ insurance lawsuits filed against insurance companies. This is driven by Florida’s bottom-five legal climate and has significantly impacted the financial health of the property insurance market with six insurance companies entering receivership this year. Meanwhile, Floridians’ property insurance premiums are three times the national average. At the root of the problem is Florida’s one-way attorney fee statute which has been manipulated into a tool to sue insurance companies over small amounts, often less than the lawsuit filing fee, and intended to drive larger attorney payouts. These lawsuits are a volume business, attempting to force companies to settle or pay claims to avoid drawn out litigation while certain attorneys collect fees. In some of the more egregious cases, attorneys collect ten times or more in fees than the policyholder receives for their damaged personal property.

Repealing Florida’s unique one-way attorney fee shifting laws will immediately remove one of the largest incentives to litigate. If repeal is accomplished during the upcoming legislative session, it will go a long way in improving Florida’s legal climate to the top quartile in the nation.

Florida 2030 Blueprint Goal: Actuarially Sound Property Insurance Rates Based on Actual Risk and Competition

Citizens Property Insurance Corporation, the state’s intended insurer of last resort, has grown by 362,000 policies this year alone while private insurers have reduced their number of policies in Florida or gone out of business. Citizens Property Insurance rates are also capped and cannot increase by more than 11 percent per year, despite the fact that many in the private insurance market are are needing to increase rates by 20-40 percent just to keep up with runaway lawsuits and fraud costs. This means that Citizens’ rates are more affordable than the private market. In fact, 99 percent of Citizens’ rates are less than the private market – but artificially so. Unfortunately, Citizens charges about 30 percent less than it should to cover its insured risks.

Legislation was filed during the 2022 regular session that would allow private companies to take a policy from Citizens Property Insurance if the private company charges within 20 percent of the Citizens’ premium. Another proposal offered earlier this year would remove second homes from the “glide path,” effectively uncapping rates. Both proposals would allow the private market to be more competitive with Citizens Property Insurance and help return Citizens to the insurer of last resort.

The aforementioned reforms along with additional policy solutions will likely arise during the special session or upcoming legislative session. Citizens having actuarily sound property insurance rates and returning to the insurer of last resort is essential for the health of Florida’s insurance market and in attracting new capital to the state.

Florida 2030 Blueprint Goal: Regulatory, Labor and Operating Risk Environments Rated Among Top 5 in the Nation

Florida’s property insurance market was described as “dire” and on “life support” by top regulators and insurance officials at a time when a named storm had not hit Florida’s coastline in a few years. Because this crisis is not due to hurricanes but is instead a man-made crisis fueled by litigation and fraud, the market has continued to worsen, leading to insolvencies in the private market and growth of the state-backed Citizens Property Insurance Corporation. Hurricane Ian and Hurricane Nicole making landfall has only exacerbated this crisis. If the needed reforms are addressed during the upcoming special and regular sessions, the operating risk for Florida’s policy writers will be much improved and Florida’s competitiveness enhanced.

If you would like more information on Tallahassee’s connection with the Florida 2030 Blueprint goals, please contact Chad at 850-521-1268 or ckunde@flchamber.com.