Homeowners in Central Florida should be prepared to face higher property insurance rates next year, increases fueled by busy lawyers and record-setting hurricane seasons.
Some insurance companies have asked the Florida Office of Insurance Regulation for increases of more than 30% in the coming year. While such skyrocketing costs were often felt in coastal cities, the insurance industry contends rising legal costs are spurring premium increases across the state.
Alexis Bakofsky, director of communications for OIR, said the increases are the results of busy hurricane seasons combined with higher costs for reinsurance and litigation.
This year set a record for named Atlantic storms and for named storms making landfall in the U.S. Companies are increasingly turning to reinsurance — the practice of being insured by another insurance company — to cover catastrophic exposure. When more natural disasters such as hurricanes happen, the price of reinsurance goes up.
“Unfortunately, these developments have presented challenges not only to our property industry but also to our consumers,” she said. “After multiple years of rate decreases, OIR is seeing an increase in proposed average annual premium increases for Florida homeowners’ rates.”
Some examples include Capitol Preferred Insurance, which asked OIR twice this year to raise rates, by 47% in February and again by 26.2% in August. The February request was later lowered and approved at 33.5%. First Community Insurance Company sought one of the more modest increases, requesting an average statewide rate change of 24.6%. Companies don’t need the permission of regulators to raise rates by less than 15%.
Senate President Wilton Simpson, R-Trilby, said lawmakers would take up proposals aimed at limiting lawsuits and payouts over property insurance claims as a way to combat higher premiums.
“The rates are going up 20, 30, 40% in the last year and certainly are going to go more if we don’t do some things in that arena,” Simpson told reporters after the annual organizational session in Tallahassee on Nov. 17.
He said his chamber would likely consider bills that have been discussed in recent years but failed to pass, such as limiting the practice of multiplying attorneys’ fees in difficult or complex cases or reducing the amount of time to file a claim after a storm hits from three years to one year.
Those bills, however, have failed to get to Gov. Ron DeSantis’ desk amid heavy opposition from trial attorneys and concerns from some legislators that they could hurt a homeowner’s ability to sue insurers that deny or delay paying out claims without cause.
Attorney Mark Nation, who handles home insurance cases for Morgan & Morgan, said measures aimed at reducing attorney involvement will mean insurance companies will lose the incentive to pay on claims. “You think there are a lot of denials now? Think about if people like me didn’t exist,” he said.
Nation points to a 2019 law aimed at preventing assignment of benefits abuse, where homeowners can give a third party the right to collect payouts and make repair decisions for a home.
“That was supposed to help,” he said. “But premiums still went up.”
Insurance companies have perennially complained about rampant lawsuits for frivolous or fraudulent claims, with many instigated by aggressive contractors or law firms canvassing areas after a storm and conducting expensive repairs for minor claims.
But now, they say, it’s reaching crisis levels and spurring double-digit rate increases even in inland areas.
“It’s exploding, and it’s really taking a toll on the cost of the claims,” said Michael Carlson, president and CEO of the Personal Insurance Federation of Florida, which counts State Farm, Progressive and Farmers Insurance among its members.
Even if some legislation is passed, it could take a year or more for homeowners to see rate reductions. Lawmakers don’t meet until March, and any new law likely wouldn’t take effect until July 1.
Then insurers and regulators would see if lawsuits are actually reduced before filing for new rates for 2022.