The Florida Senate on Tuesday approved sweeping legislation that would overhaul the state's property insurance system, which has struggled due to insolvencies, high costs, and major storms.
The bill would create a $1 billion reinsurance fund, reduce litigation costs and compel some customers to leave a state-created insurer. It also would force insurers to respond more promptly to claims and increase state oversight of insurers’ conduct following hurricanes.
The Republican proposal was put forth during the GOP-led Legislature's second special session this year and aimed at stabilizing the state's property insurance market. The state House is expected to give the measure final passage this week.
Florida has struggled to control rising property insurance costs and hold onto insurers in a market where natural disasters weigh heavily on the cost of business. The session comes after Hurricane Ian smashed into the southwest coast in late September and caused an estimated $40 billion to $70 billion in insured losses.
The bill, which builds on insurance legislation passed in May, is not expected to immediately lower rates for policyholders, which has drawn criticism from Democrats. Backers of the bill argue that it is meant to stabilize the market, which then could lower rates in the future.
“As we look forward, and as these reforms take place and work their way through the rate-making process, I absolutely believe it will drive their costs down," said Republican state Sen. Jim Boyd, who sponsored the bill. “While it might not happen today, I absolutely believe we will have rate relief as we move forward in the future.”
Average annual premiums have risen to more than $4,200 in Florida, which is triple the national average. About 12% of homeowners in the state don’t have property insurance, compared to the national average of 5%, according to the Insurance Information Institute, a research organization funded by the insurance industry.
“Homeowners in Florida are being crushed right now by the cost of housing and insurance costs are a major part of that," said Democratic state Sen. Darryl Rouson. “Any action that does not address the instability and costs to the consumer and does not provide meaningful near-term relief for policyholders, I believe falls short of our goals.”
Senate Democrats filed a round of amendments to the bill and peppered Boyd with detailed questions about the state of the insurance market, insurance litigation, and various elements of the complex proposal.
Republicans rejected the Democratic amendments following several hours of debate and eventually approved the legislation.
The insurance industry has seen two straight years of net underwriting losses exceeding $1 billion each year in Florida. Six insurers have gone insolvent this year, while others are leaving the state.
The insurance industry says litigation is partly to blame. Loopholes in Florida law, including fee multipliers that allow attorneys to collect higher fees for property insurance cases, have made Florida an excessively litigious state, a spokesman for the Insurance Information Institute has said.
The Florida Office of Insurance Regulation has said the state accounts for 76% of the nation’s homeowners’ insurance lawsuits but just 9% of all homeowners insurance claims.
The legislation would remove “one-way” attorney fees for property insurance, which require property insurers to pay the attorney fees of policyholders who successfully sue over claims while shielding policyholders from paying insurers' attorney fees when they lose.
Attorneys groups have argued that the insurance industry is at fault for refusing to pay out claims and that policyholders sue as a last resort. The alternative, arbitration, tilts in favor of insurance companies, they say.
“Is the answer punishing the people of Florida? They’re not going to have any chance to oppose a decision an insurance company makes unless they’re independently wealthy,” Ron Haynes, a Tampa attorney speaking for the Florida Justice Association, told the House Appropriations Committee. “Insurance should be a blanket of coverage and not a blanket that smothers you.”
The bill would provide $1 billion in taxpayer funds for a program to provide carriers with hurricane reinsurance, which is coverage bought to help ensure they can pay out claims. It would offer “reasonable” rates in a market where companies have complained about rising costs.
The proposal will also speed up the claims process and eliminate the state’s assignment of benefits laws, in which property owners sign over their claims to contractors who then handle proceedings with insurance companies.
“This is groundbreaking legislation. In fact, it is the strongest insurance reform package we have ever seen proposed in Florida," said Mark Friedlander, a spokesman for the Insurance Information Institute. He called litigation abuse and assignment of benefits abuse the “root causes of Florida’s property insurance crisis.”
The unstable insurance environment in Florida has pushed homeowners unable to get private coverage to the state's public insurer of last resort, Citizens Property Insurance, which this summer topped 1 million policies for the first time in almost a decade.
The bill would force people with Citizens policies to pay for flood insurance and require moves to private insurers if they offer a policy up to 20% more expensive than Citizens.
“We have an overall bill here that in my opinion is absolutely historic," said Barry Gilway, Citizens president, CEO, and executive director. "It is the start of a major change in the property insurance market in Florida. It will draw capital back into the Florida marketplace. It won’t happen overnight, but it will happen a lot sooner than people think.”
Lawmakers this week are also expected to pass separate bills that would provide property tax relief to people whose homes and businesses were made uninhabitable by Ian and give 50% refunds to commuters who pay more than 35 highway tolls in a month with a transponder.
