Florida Rep. Ahem: National insurance market desperately needs an oil change

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As the Florida Legislature prepares for its second special session on property and casualty insurance in 2022, now is the time to examine why the market has spiraled out of control and the solutions needed to fix it. It’s time to discuss strategies. Many Floridians are wondering:

  • How could nine insurance companies go bankrupt within two years?
  • Why have rates tripled on average for all homeowners?
  • What caused state-owned Citizens Property Insurance Corporation to increase policyholders from an all-time low of 420,000 to more than 1 million, approaching 2 million?

News outlets across the state have done a decent job of highlighting a failing insurance market. However, many misconceptions are associated with these reports. First, due to storms, and second, reinsurance rates are exploding due to climate change. In fact, many factors contributed to the crisis, with companies in bankruptcy being or having been bankrupt long before the start of the 2022 hurricane season. Reinsurance rates have increased, but the law limits the costs that can be passed on to consumers to 15% annually. Although a significant amount, that’s only 60% of his 300% rise since 2018.

So this crisis begins and ends with lawsuits.


Most people have seen the headlines stating that while Florida accounts for 80% of US property insurance lawsuits, it only accounts for 8% of claims. Further analysis of this data shows that the average annual number of lawsuits in all other states is less than her 1,000, while Florida averages 100,000. This leads us to the billion dollar question. How? Admittedly, this question deserves a complex answer, but it can be boiled down to this: Proliferating Combinations of Assignment of Interest (AOB), Ambiguous, 2016 Florida Supreme Court Judgment (Cebo vs. American Home Assurance), and the 100-year-old One-Way Lawyer’s Fees Act (627.428) set off a perfect legal storm that brought the state’s insurance market to its knees.

Here’s a layman’s attempt to explain each…

AOB is commonly used in healthcare. You go to the doctor and allocate your benefits to them so they can work with your insurance company for claims purposes. We applied this practice to homeowners in need and realized we had full control over their claims, including the ability to file a lawsuit. And voila! Out of nothing came great incentives and a cottage industry was born. Prior to 2010, the state generated about 400 lawsuits a year, but that number ballooned to 30,000 in 2016 as the AOB scheme was unleashed. Strong words were needed from Gov. Ron DeSantis in his first state address of 2019. To move the needle with modest reformation when he declared that AOB had “degenerated into a racket.” Unfortunately, by then, this racket had metastasized out of control.

This led to the 2016 Sebo decision by the State Supreme Court. In practice, this allows contractors to minimize damage to roofs and buildings that are already deteriorating, until minor damage combined with poor structural condition necessitates a complete replacement at the insurer’s expense. It could be argued.

Now let’s consider the Holy Grail, thanks to Florida Law No. 627.428. One-way attorney fees. The way this law works is relatively simple. If he sues the insurance company and the case goes to trial, he just needs to win $1 more than his last pretrial offer, regardless of how much he sued. If successful, the homeowner will be reimbursed for all legal fees at the insurance company’s expense. Hailed as the law of David v. Goliath, this fee structure was created to level the playing field so that the Smith clan (David) could fight back against the big insurance companies (Goliath). For decades it was considered a fair and rational concept.

However, mixing these three components together makes things radioactive.

Essentially, there is nothing stopping a contractor from coming to your home, assuming your rights, and filing a large claim while finding minimal damage. And work with lawyers to develop your case and win huge settlements. Financially, it works like this: They sue the insurance company for $100,000 against a new roof that costs $25,000 if rightfully damaged. But there are only two shingles that should have cost $150 to replace.The insurance company has to meet along the way, and going to court costs more, so we settle for $65,000. Multiply that by 130,000, the number of lawsuits filed last year, according to State Financial Services Department data.

That’s worth over $8 billion and includes a ton of eyeball emojis.

“If four-fifths of TV commercials are insurance company ads, then how can these insurance companies claim poverty and say this is true?” However, it still accounts for only 10% of Florida’s market share. This was only Mother Nature being a cause for concern from 2004 to his 2005 hurricane season. Citizens Insurance is now the state’s largest provider with over 15% of his market share. “Domestic” (Florida Only or Predominant) insurers are the primary source of in-state homeowners insurance.

These insurance companies are not without liability, whether national or national. Despite the multi-billion dollar racket that continues to be played against them, many insurers have gone mad because they neglected the most fundamental aspect of insurance: risk management. The few that survived this market did so responsibly, as they chose to sacrifice growth to protect solvency. The now defunct insurer said he was two to three years too late when it came to tightening underwriting practices. I also do not understand why some companies pay not only regular dividends but increased dividends and investor bonuses when corporate surpluses are being depleted by tens of millions a year. Worse, some went into debt for it. Bankruptcies have risen further regardless of the reforms enacted in December, and the number of incumbents with stable footings can still be counted on one hand.

The topic of insurance may seem tedious, but it is an essential infrastructure of a nation. It’s the oil that keeps the free market engine running and it’s safe to say the Florida property insurance market needs an oil change! What should the new synthetic blend look like? The state has attempted to stop the abuse three times since 2019. AOB was initially regulated to allow her a 14-day revocation period, and new fee transfer measures were introduced for third-party litigation. Then, in 2021, a hybrid version of that fee structure was enacted for first-party litigation, shortening the period for filing claims from his five years to his two years. Finally, a special session in May 2022 will fully eliminate one-way legal fees for AOB, ban legal fee multipliers, update roofing building codes, and address loopholes exploited in 2016 and beyond. and the Sebo case.

Did it work? There are some, but they aren’t fast enough. Fortunately, Hurricane Ian did not have a fatal blow to the insurance industry. One reason is that these previous reforms had been enacted. Each reform was a tough battle wrought by good legislators, and none crossed the finish line without the cheering of the governor. Because people in Florida know there will always be more hurricanes on the horizon.

To stabilize the market in the near future, like most other states, one-way attorney fees must be abolished altogether. Other Modifications: Disputes over pricing and scope can be resolved through arbitration or independent evaluation. The period for filing claims should be reduced to one year for her, and the transfer of rights, interests, etc. should be completely prohibited. Litigation where insurers engage in genuinely malicious practices should be allowed to continue.

Once these measures are taken, things will slowly return to normal, or Florida will return to normal as soon as possible.

Blue-chip insurance companies start growing again, pressure on citizens eases, and new capital enters the state and forms to fill the void left by the bankruptcies. Reinsurance pricing will also stabilize. Their world-class modeling can predict storm losses to the nearest fraction, but no model can predict how a legal racket will produce hurricane-wind losses in a year without hurricanes. Appropriate Public Policy If there is, the insurance market will fire all cylinders again.

I can’t wait for the oil change.

Kevin Comerer is a consultant and registration lobbyist for Rubin, Turnbull & Associates in Tallahassee. Previously, he served as Chief of Legislation for American Integrity Insurance.

Top photo: AP

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