The high cost of property insurance, according to political polling presented at the annual Florida Chamber of Commerce Insurance Summit this week, is the top issue on Floridians’ minds, uniting all political parties and almost every demographic group.
So the annual event that brought together a wide swath of state leaders had plenty of hoopla about improving indicators in the state’s insurance market — even if it hasn’t yet resulted in significantly lower numbers on policyholders’ premiums. Still, those bills are increasing at lower rates, if not largely level with last year, according to insurance industry leaders.
High praise was ladled onto efforts the Legislature undertook nearly two years ago when it met in a special session to address the state’s wobbling insurance market.
“The fruits of the Legislature’s and the governor’s labors are coming to pass,” said Holly Raschein, a Republican state representative until 2020 and now the government relations director of Ashbritt, a disaster management company. “The tide is turning, and … I think we are moving in a positive direction, and that’s very, very exciting to watch.”
Florida policyholders are still paying the highest premiums in the country, but the summit focused on emerging trends wrought by the state’s sweeping changes to insurance business laws. Plus, other states are starting to catch up to Florida’s insurance misery, according to presenters.
Florida insurance market improving mainly for insurers
The high cost of car insurance and medical malpractice in Florida also was talked about at the annual summit, but property insurance generated the most discussion. Among the developments widely discussed:
- Lawsuits in the first three quarters of 2024 are down 56% compared with the first three quarters of 2021, responding to 2022 legislation passed to curtail legal fraud and abuse driving up insurers’ costs.
- Insurance companies’ filings show an average 0.8% requested rate increase in October, which is 10 times lower than a year ago.
- Citizens Property Insurance Corp., the state’s insurer of last resort that insures the most property in Florida, announced Wednesday that it had reached a long-desired milestone: decreasing the number of policyholders to fewer than one million as of Nov. 29, down from its high of 1.4 million policyholders in September 2023. That means less chance that all insurance policyholders get an extra assessment on their premiums to replenish reserves at the state-backed nonprofit company. An extra surcharge was tacked on after the 2004-05 hurricane season because of Citizens’ depleted reserves.
One presenter said this year’s hurricane season — the first with multiple Category 3 or stronger storms since 2004 — represents an opportunity. Hurricanes Debby, Helene and Milton might prove to the money markets that Florida’s insurance industry is not as risky as it was, even if policyholders are still complaining about high premiums and the bevy of new companies entering the market are limited to Florida-based companies without the reserves of national companies.
Investors are taking note of the decreased rate of lawsuits, according to one speaker.
“I would have to say that the reforms that were put through two years ago really seem to be coming through,” said John Seo, co-founder and managing director of Fermat Capital Management LLC, based in Westport, Connecticut. “And these current storms … really are helping to validate that.”
What changes in the insurance market were made?
Two years ago, the insurance market was in crisis.
As homeowners were seeing double-digit increases in their premiums, some for a few years in a row, insurers were leaving the Florida market and others were going insolvent.
A 2021 report from the Office of Insurance Regulation pointed out the problem. It found that while Florida homeowners accounted for 7% of the insurance claims in the country, a whopping 76% of the country’s property insurance lawsuits involved Florida property.
To bring Florida more in line with how other states handle insurance litigation, the Republican-majority Legislature in 2022 and 2023 enacted some changes. Among them:
- A prohibition on including attorneys fees in insurance court settlements.
- Prohibiting contractors from engaging in contracts in which customers sign over their insurance settlement for the repair of damage, so-called “assignment of benefits” contracts.
- Tightening timelines for when insurers have to respond to and settle customer claims.
In enacting the changes, lawmakers sought to calm the markets from which insurers purchase backup funds, called reinsurance.
The state’s vulnerability to catastrophic storms combined with the high rate of lawsuits by policyholders in the wake of storm damage was driving up reinsurance costs, legislators believed. Insurers rely on reinsurance markets to help shoulder the risk of catastrophic levels of claims. The cost of having these backup funds available in the event of a storm accounts for a large proportion of wind premium rates.
Republican lawmakers agreed that decreasing the incentive for attorneys to sue would calm the markets. Critics, however, see policyholders left with little recourse if they don’t agree with an insurer’s estimate of the damage.
What’s happening now?
Fermat’s Seo compared the markets’ reaction to 2022’s Hurricane Ian with this year’s Hurricane Milton to illustrate his point.
“So Ian makes landfall, and the cap bond (capital bond) market crashes 10% on the spot — it’s like a flash crash,” Seo said. “The most significant loss in our market’s history was right after Ian made landfall.”
Milton had the same projected losses as the earlier storm, Seo said. But a significant part of the storm risk has been taken out of the equation, he said.
“Milton affected the cap bond market virtually nil,” Seo said.
Only time will tell if the luck holds in several factors, presenters said. Insurance companies that are going to re-up reinsurance coverage next January or June will find out if the reinsurance rates remain as favorable as this year. Lawsuits in the wake of storms usually don’t hit until six months after landfall.
Changes on the horizon?
Floridians, on average, might be paying more for their insurance than the rest of the country, but lawmakers at the summit appear ready to resist calls from beleaguered policyholders to alter the current course.
“I feel a little bit like Braveheart right where he’s waiting for the attack and he’s telling his people to hold with their spears,” said Republican state Sen. Jay Collins, who represents the Tampa area. “That’s where we’re at.”
He cited the flattening levels of rate increases for the time being.
“When you cobble that with multiple hurricanes from Ian and Idalia to Milton and Helene, that adds amazing complexities to a market that’s starting to stabilize,” he said. “Those signs are there, but we have to hold on with what we’ve got. We have to continue to have these hard conversations with people in our community, and we’ve got to show them these numbers.”
Policyholders need more information about just how risky Florida is. Approximately one-third of the world’s insured hurricane risk is in Florida, according to one slide summit attendees were shown. The challenge lies in convincing the public that the legal changes that diminished their ability to sue insurers are ultimately going to also benefit them.
It’s an information war, subject to political demagoguery, one panel agreed. It included Tim Cerio, president and CEO of Citizens; Chris Spencer, executive director of the Florida State Board of Administration; and Michael Yaworsky, who heads up the Florida Office of Insurance Regulation.
The insurance industry needs to convince policyholders they care and legislators that the industry’s transparency and accountability are preferable to the lawsuit-driven firestorm the state was facing, Yaworsky said.
If not, Yaworsky said, consumers will start to believe another message: “You need me on that billboard,” he said, referring to attorney advertisements.
Yaworsky also acknowledged Florida’s particular challenges, calling the state “paradise on a sandbar.”
“It’s beautiful, but it can be a challenge to insure,” Yaworsky said.
Anne Geggis is the insurance reporter at The Palm Beach Post, part of the USA TODAY Florida Network. You can reach her at ageggis@gannett.com.Help support our journalism. Subscribe today
This article originally appeared on Palm Beach Post: Insurance market ‘starting to stabilize.’ Will it help homeowners?