With this week’s landfall of Category 3 Hurricane Idalia in the Big Bend area, we are reminded that we are at the peak of Florida’s annual hurricane season. Part of being a Floridian is knowing we must personally prepare for the worst and hope for the best, mitigate potential damage by hardening our homes and businesses, and have a plan for the worst-case scenario. As those directly affected by the storm recover and rebuild, thankfully, Florida’s elected leaders have done their part to pass meaningful and overdue reforms that will help further position Florida to weather the insurance “storm” moving forward.
Florida’s property insurance crisis had been building for years, not just due to hurricanes but driven by a human-made litigation crisis evident by Florida’s bottom-five national legal climate ranking. In 2021, Florida accounted for over 75% of U.S. homeowners’ litigation while, incredibly, Florida only had 7% of the nation’s homeowners’ claims. Since excessive litigation drives up costs and losses, it’s no surprise that Florida’s property insurance carriers have posted losses for 16 consecutive quarters. As another indicator of the health of Florida’s property insurance market, Citizens Property Insurance Corp., the intended state-backed insurer of last resort, has grown to over 1.3 million policies and is now Florida’s largest insurer. This all led to a number of insolvencies and insurance companies deciding to leave Florida in recent years.
In parts of Florida, and in some circles, there is a mistaken narrative that Florida’s elected officials have not made significant strides to fix our insurance problem. Thankfully, Gov. Ron DeSantis and the Florida Legislature have taken significant steps over two special sessions and the 2023 legislative session to address this human-made crisis. It is true some insurance companies have decided to reduce or stop writing certain insurance policies in Florida, but what is missing from the too many narratives is these decisions are often based on numerous factors, including profitability and minimum capital requirements, global and national realignment of their risk portfolio or other market conditions, some of which existed prior to legislative action.
These new laws should help consumers by stabilizing the market, curbing excessive litigation, attracting additional capital and increasing competition. A competitive market is key to providing rate relief to consumers, and part of increasing competition is allowing the marketplace to work. This means additional government mandates, rate caps or unnecessary regulations on market forces will only discourage additional capital or additional insurance carriers coming to Florida at a time when the market is recovering, and new insurance carriers are vital to provide consumers more and better options. With 1,350 miles of coastline, Florida has over a third of the world’s insured hurricane risk, so we must make Florida’s insurance market more attractive for competition.
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The good news is there is evidence the reforms are already working. As Florida House Speaker Paul Renner recently wrote in the Orlando Sentinel, “Private companies are also showing record interest in assuming policies from taxpayer-backed Citizens, lowering the risk of a future assessment on taxpayers.” Renner pointed out that “reinsurance, which fuels greater capacity for Florida insurance carriers, is readily available at better prices than expected.” Other insurers have also indicated they are seeing the light at the end of the tunnel. State Farm recently announced they are recommitting to the Florida market and are encouraged by the reforms passed by the Legislature. Kin Insurance, another carrier in Florida, “is even more excited and committed to Florida than ever,” and added, “The full impact of the reforms hasn’t been felt yet, since everything in insurance takes time, but the reforms were systematic and the trajectory is very positive.”
In addition to legislative efforts to crack down on lawsuit abuse, Florida’s state leaders passed legislation to ensure insurance companies are more accountable to their policyholders. Any bad actors in the insurance industry will now face increased oversight and stiffer penalties if they do not hold up their end of the bargain.
As Floridians rebound from Idalia and prepare for future storms, it is important to understand what your homeowners insurance policy covers and what it does not — such as whether flood damage is covered. Unfortunately, too many people in Florida voluntarily don’t have flood insurance and are left with the bills after an event like Idalia, where flooding and storm surge plagued several counties on the west coast.
The governor and Florida’s legislative leaders have indeed prioritized stabilizing Florida’s property insurance market with meaningful solutions that actually address the property insurance crisis of today. What Florida needs now is time to let these bold reforms take hold and constant vigilance for new litigation schemes that would undo the progress that has been started. Despite some narratives, there are signs of relief for Florida homeowners every day as carriers write new policies, take policies out of government-backed Citizens Insurance, or new companies enter the Florida market.
Mark Wilson is the president and CEO of the Florida Chamber of Commerce and can be reached at email@example.com. To learn more about Florida’s property insurance market and the world we are entering following these reforms, come to the 2023 Florida Chamber Annual Insurance Summit Dec. 14-15 in Orlando.