The Florida Homeowner’s Insurance Crisis
Florida homeowners have continued to see dramatic property rate increases. At the same time, the insurance industry is losing billions of dollars to unnecessary lawsuits from third-party contractors. Insurers contend that a flood of questionable, if not fraudulent, insurance claims have played a major role in driving up costs.
According to the Florida Association of Insurance Agents, Florida insurers paid out $15 billion in claims costs between 2013 and 2020. Of that, only 8% was paid to consumers, while 71% was paid to attorneys. Through the first three quarters of 2021, property insurers had $1.22 billion in underwriting losses.
Florida: The Insurance Fraud Capital of the United States
Insurance fraud is worse in Florida than in any other state, with a record number of counterfeit claims after hurricanes and hailstorms. It’s turned the insurance industry upside down, running many companies right out of the state. Several years ago, there were more than 50 companies offering homeowner’s insurance in Florida—it has since dropped to about 10 options.
Bad actors in the construction, roofing, public adjusting, and legal industries have used abusive solicitation and marketing tactics to manipulate the claims process for their benefit. For context, Florida accounted for 8.16% of policies in 2019, yet 76.45% of property claim litigation nationwide. Florida’s ratio of lawsuits opened to claims closed without payment is eight times higher than the next highest state at 27.75%.
Connecticut has the second-highest ratio of suits opened to claims closed without payment at only 3.4%. The next highest three states are New Jersey (2.45%), Rhode Island (2.23%), and Pennsylvania (1.82%).
This trend began several years ago when most of the disputes were related to water damage claims. Now, roof replacement is leading the litigation. Florida insurance regulations allow policyholders to assign their benefits to a contractor, who then can make repairs and send the bill directly to the insurance carrier. This essentially allows contractors to fraudulently inflate costs, directly charging insurance companies greater than the fair market value of the repair. In such a scenario, an insurance company might deny the claim, prompting the contractor to sue. Facing litigation, the insurance company must decide whether it will pay the inflated price or go to court and risk paying the inflated price plus expensive attorney fees.
Left with fewer private options, Florida homeowners are turning to the state’s insurance company, Citizens Property Insurance Corporation. According to Citizens, it is adding about 5,000 new policies per week and had 776,790 policies in effect as of January 31. Citizens reached 1.4 million policies in 2012, but the number of policies slowly decreased in years since, reaching 421,332 in 2019. In a December 15 press release, Citizens claimed it expects to “surpass 1 million policies in 2022 and will be the least expensive or only option for many Floridians as private companies continue to sustain losses and cut policyholders.” In November, Citizens’ policies were found to be cheaper than private market options 97% of the time.
The concern is with Citizens being overburdened—a major hurricane could cost the state of Florida billions of dollars—with rates on most insurance policies in the state rising to cover claims, and insurance carriers without enough reserves collapsing.
Ultimately, insurers are in business to make money and pay claims, so the cost of claims and litigation must be passed along to policyholders. This increased cost is causing premiums to rise from one year to the next.
Alleviating the Problem?
With the annual legislative session ending, it remains unclear whether the Senate and House can bridge differences on key issues such as roof damage claims. Senate sponsor Jim Boyd (R-Bradenton) implored senators to address problems in the insurance market before they voted 28-11 to approve his bill, SB 1728. The most controversial part of the Senate bill could lead to homeowners facing a new deductible for roof damage claims. Under the bill, that deductible would be up to two percent of overall policy limits. For instance, a homeowner with $300,000 in overall coverage could face a $6,000 deductible to replace a damaged roof. Under the bill, the deductibles would not apply if roofs were damaged in named hurricanes, if homes are total losses, or if roofs can be repaired without being replaced.
The bill has drawn skepticism from some Democrats, who question whether it would lead to homeowners’ rates being reduced. Sen. Annette Taddeo (D-Miami), for example, asked “[W]hat happens if the abuela back in the district can’t come up with the $6,000?” referring to a hypothetical grandmother.
However, Boyd contends that requiring deductibles could help deter “bad actors.” SB 1728 addresses situations in which homeowners would receive coverage offers from private insurers. Under the bill, such consumers would not be eligible for renewal with Citizens unless the private insurers’ premiums are more than 20% higher than what Citizens would charge.
If you have concerns about your insurance policy, Miller Trial Law can help you. Contact us for a free, no-risk consultation prior to filing your claim.
Please call us today at (305) 697-8312. We look forward to serving you!
