With home insurance prices expected to rise sharply, the Sun Sentinel in South Florida asked leading insurance experts to share their views on the disintegrating state of the market. Here’s what they had to say. Answers have been edited for length and clarity.
Locke Burt, President and CEO of Security First Insurance Co.
Insurance cost drivers are known and reported before – bad weather, increased reinsurance costs, seedy contractors, aggressive claimants with a favorable legal environment, water losses, fraud. What is different is that trends seem to be accelerating and nothing useful has been done by lawmakers to change the history of increased costs that Florida law requires to be passed on to consumers in required annual tariff filings.
The private sector is shrinking and raising interest rates as quickly as possible because the losses are unsustainable and providers of additional investment capital simply do not believe that the situation in Florida will improve for several years. That’s why the public companies sell for 50 cents on the dollar.
That situation won’t change until lawmakers hear from their voters and decide to do something, the weather improves, or the lawyers go away.
Travis Miller, Insurance Regulatory Attorney, Radey Law
In Florida, we face unique but predictable challenges due to our significant coastal exposure and associated hurricane risk. Insurers anticipate these challenges and are usually well prepared for them. However, these challenges have been exacerbated in recent years by other issues that are behavioral rather than meteorological. Put simply, the loss experience in Florida has deteriorated to a point not historically seen in this state and, after similar events, is significantly worse than any other state.
Conditions in the current marketplace only reflect how these concerns manifest themselves over time if left unaddressed.
Barry Gilway, President and CEO of Citizens Property Insurance Co.
The biggest problem, in my opinion, is the unprecedented withdrawal of private companies from much of the market, including Southeast Florida, Tampa Bay, and even the Orlando area.
We are entering the fourth year of losses for most private airlines. Due to ongoing losses, companies in less risky areas of the state are unable to establish new guidelines to support their finances. It is just very difficult to get new capital into a market that is starting to lose for the fourth year in a row.
The only options for private companies are to get out of the markets, insure only newer homes, and seek unprecedented rate increases to pay for growing litigation, significantly increased reinsurance costs, and social inflation that further the number of water losses and the average severity of losses increase.
For the citizens, this means that there is a significant and growing price difference between us and them. (Our prices are limited to 10%.)
Gilway defined social inflation as trends that lead to more litigation, broader contract interpretations, and bigger jury awards.
Kevin Walton, General Manager, Product and Reinsurance, People’s Trust Insurance Co.
Loss creep – the steady rise in the unforeseen cost of Irma and Michael’s claims – leads to an increase in the serial reinsurance rate of 20% and more per year, which, plus the cost, has to be passed on to consumers. This has worsened since 2018. Until Hurricane Mathew in 2016 and then after Irma in 2017, we haven’t had a significant storm since Wilma in 2005. The reinsurance costs decreased until 2018 and are now increasing significantly.
Irma’s losses are now more than three times what was expected, which is changing the way reinsurers’ pricing. One hundred percent of these increases are caused by public adjusters and lawyers adding to the cost of claims. The frequency of these activities (solicitation of fraudulent and excessive claims) is unprecedented. This is why consumers should be concerned.
Consumers should call their lawmakers and request a change in legislation regarding one-way attorney fees that encourage attorneys to bring unjustified and frivolous lawsuits without risk.
Dulce Suarez-Resnick, vice president and sales producer, NCF Insurance Associates
The majority of businesses writing homeowners in Miami Dade, Broward, and Palm Beach counties have closed. That means they won’t accept any new requests that include storm coverage.
The numbers don’t lie. Citizens are growing again and that is a sign of the market between non-renewal and the lack of availability of options. Citizens could become the largest homeowners and commercial real estate companies in the state again, especially in terms of storm coverage.
The question is: can we afford to continue on this path?
William Stander, executive director of the Florida Property & Casualty Association
Contractors, public experts, and attorneys make insurance claims and suits to fill their own pockets at the expense of policyholders. Such losses take 18 to 24 months to show up in the insurance rates people pay. The simple answer is that things are now coming to a head, just as we have warned for years.
We can solve it by doing what they did in Texas – by linking how much the lawyer makes with the profits for their client, rather than the risk-free, for-all-free that is now promoting questionable claims and shotgun lawsuits.
In one disgusting example from South Florida, a roofer was handing out flyers promising a $ 500 American Express gift card just to let someone on your roof. In a similar flyer, the contractor says they are 99% certain that the roof has hurricane damage. These ran out in the days before the registration deadline for Hurricane Irma.
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Amy Boggs, Chair of the Florida Justice Association’s Property Insurance Committee (a trade association for plaintiffs’ attorneys)
In many ways this insurance industry “crisis” is self-caused. Every year lawmakers hear from the insurance industry that higher rates are required. Every year there is a different culprit for the problem – you close a hole and suddenly there is a new one. There is no end in sight.
There is also no assessment of whether the legislative “correction” has worked. Before a new law to cut consumer rates can actually go into effect, the industry is back, saying one more change is needed.
When do we say enough is enough and hold Florida insurance companies accountable? If you keep asking the thousands of homeowners and businesses still unable to rebuild to ask consumers to pay ever increasing premiums without those premiums actually paying off, this is a scam.
These are consumers who had claims pending payment of claims, policyholders who were victims of Hurricane Michael and STILL failed to pay their claims three years later.
In any other industry, a company whose business model was to generate income without intentionally working under contract would be prohibited from operating. However, this has become standard practice for insurance companies.
Paul Handerhan, President of the Federal Association for Insurance Reform (a consumer-oriented monitoring group for insurance)
While the financial stability of the Florida homeowner insurance market is at its weakest due to soaring underwriting and reinsurance costs, I am confident that leadership in both the Florida House and the Senate is poised to make reforms to ban those who the insurance system of our state conspires to play and abuse by continuing its coordinated systems. FAIR will actively support Florida’s legislative leadership and necessary reforms to protect policyholders.