Florida insurance market broken, lawmakers must find fixes

The homeowners’ insurance market in Florida has been broken for so long it’s hard to remember when it wasn’t. Now we have another round of companies going under, another set of lawmakers declaring it a crisis and premiums for consumers soaring once again.

Of course, the Legislature had 60 days to do this work but didn’t. Insurance reform became another victim of lawmakers’ focus on culture wars rather than issues facing everyday Floridians.

There’s talk of a special session to address the issue, and we think that’s a good idea, with one serious caveat: Legislators must come up with concrete plans to help consumers. Insurance companies cannot be the primary concern. Giving homeowners relief from double-digit increases in premiums has to be at the center of any reform.

Focus on consumers

We understand the argument, advanced by Sen. Jeff Brandes, a St. Petersburg Republican, that you help consumers by helping companies stay in the Florida market. If you can’t get any insurance at all, that’s obviously a problem. Most mortgages require homeowners’ insurance.

But Brandes, who is leading the charge for a special session, might have a problem selling that idea. A lot of consumers believe — because it is true — that they can always get insurance from Citizens Property Insurance, the “insurer of last resort” created by the state in 2002 to cover homes that private insurance won’t.

Citizens — spurred by Hurricane Andrew in 1992, which bankrupted insurance companies — is backed by the state. So if there is a catastrophic event that wipes out all of its money, the state can add a surcharge onto all Florida policies — homeowners, boat, car, even rental insurance — to pay for the losses.

With each insurance company that goes belly up, Citizens sees a flood of new policies. As of last month, Citizens had about 820,000 policies, a number expected to reach 1 million by the end of the year. In March 2020, it had about 500,000 policies. That’s an enormous increase in the amount of risk that the state is taking on.

So while Citizens may be the answer for more and more policy holders — for as long as Citizens can be sustained — it doesn’t solve the problem of an insurance market that is completely out of whack.

How to fix it, though, is the big question. Part of that is political will. Lawmakers would have to settle down for a deep dive if they have any real hope of making a real difference. Some legislators, including House Speaker Chris Sprowls, R-Palm Harbor, note that the fixes they tried last year still need another six months or so to be felt in premiums. But consumers are howling, rightly so, and it’s an election year, so lawmakers are feeling the heat.

Roofs and lawsuits

Some areas of focus did emerge during the (ultimately fruitless) debate over property-insurance reforms during the regular session this year. Roof replacement and litigation were identified as key elements that could be addressed to help slow premium increases.

One idea was adding a new, separate 2% deductible for homeowners who file claims for a new roof. (That would have been devastating to homeowners on fixed incomes.) Lawmakers also discussed allowing insurers to offer policies that would allow them to cover only the depreciated, or “actual cash value,” of a roof.

Legislators considered — as part of Senate Bill 1728, which got through the Senate but not the House — requiring roofers to tell homeowners that it’s illegal for a contractor to pay or rebate the cost of the deductible. (That one was aimed at shady roofing companies or public adjusters who go door to door, especially in Central Florida, soliciting business by helping homeowners file claims against their insurance companies.)

Those kinds of questionable practices have also been at least partially behind the rising amount of litigation that has added to insurance companies’ struggles. According to a 2019 Florida Office of Insurance Regulation study, the state made up 8.16% of all homeowners’ claims in the country, but 76.45% of the nation’s insurance-related lawsuits.

Florida’s insurance market is a beast with many tentacles. It’s hard to understand, let alone fix. For too long, legislators have lacked the determination to really tackle it.

But homeowners, already reeling under the increase in prices for housing, food and gas, are suffering more because Florida can’t ever seem to get this right. Solutions cannot be crafted in a way that helps insurance companies right away and offers vague promises of future relief for homeowners.

If a special session is indeed called, lawmakers must go to Tallahassee with their constituents in mind, not the industry or their campaign donors. They have to be prepared to work on actual policy, not politics. They need to come up with meaningful reforms that shut down excessive lawsuits, crack down on roofing scams and provide insurance at rates that don’t keep doubling.

That sounds idealistic, yes. But there’s this: Election Day is seven months away. If that’s not powerful incentive for lawmakers, we don’t know what is.