Is Florida Finally Fixing Its Broken Homeowners Insurance Market?
Floridians spend millions litigating insurance disputes after hurricanes. There's a better way.
The news about Florida's property insurance market is not particularly sunny these days. Headlines are full of insurers pulling out of the state, premiums shooting up, and homeowners with insurance bills higher than their mortgages. But for all the doom and gloom, there are signs that the Sunshine State is turning its dysfunctional insurance market around.
Its geography makes Florida, a low-lying peninsula jutting out into hurricane-prone waters, a hard place to insure under any circumstances. Of the $165 billion in natural disaster–caused damage the U.S. experienced in 2022, $116 billion of it was in Florida. Average annual home insurance premiums are triple the national average, according to one estimate.
It makes sense that insurance would be expensive under those conditions, but price signals are muddied and costs are inflated by the state's rules allowing policy holders to assign insurance benefits to third parties like contractors.
This creates a perverse incentive. While homeowners just want their roofs fixed, contractors are looking to maximize their profits. That leads them to charge higher prices for unnecessary repairs, secure in the knowledge they can sue the insurance company for a payout.
Contractors have been known to offer homeowners free inspections and even gift cards to get them to assign benefits to them. The state's insurance consumer advocate runs informational campaigns to warn homeowners of the more fraudulent elements of these practices.
The result of all this is that insurance litigation has exploded in the state.
The Insurance Information Institute (III), an industry group, reports that 80 percent of the nation's homeowners insurance lawsuits are in Florida, despite only 9 percent of the nation's insurance claims existing there.
The Citizens Property Insurance Corporation, a state-established insurance nonprofit company, has a $100 million annual legal defense fund and 20,000 open lawsuits pending, reports III. The institute blames litigation costs for driving up prices and driving insurers out of the state, swelling the rolls of Citizens—intended as an insurer of last resort. Efforts by insurance companies to limit their exposure to these lawsuits by limiting the assignment of benefits in their policies have been struck down repeatedly by Florida state courts.
Enter the Florida Legislature, which passed a slew of reforms in December 2022 to crack down on litigation costs and limit the state's involvement in the property insurance market, including a ban on a third-party assignment of benefits for new insurance policies signed after January 2023. That's hardly an ideal free market policy. In a better world, insurance companies would be allowed to unilaterally condition their policies on homeowners waiving their rights to assignment of benefits. Given the string of court decisions preventing them from doing just that, this is the second-best means for getting insurance costs under control.
These reforms also require people to renew their policies with private insurers if the costs of doing so are less than 120 percent of a Citizens policy.
These policies aren't retroactive, meaning the state will still see a lot of litigation and a lot of people still with state-sponsored insurance policies. But in time, they should fix some perverse incentives bring down the costs of insurance for everyone.
Rent Free is a weekly newsletter from Christian Britschgi on urbanism and the fight for less regulation, more housing, more property rights, and more freedom in America's cities.
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Yet another DeSantis story thinly disguised as yet another Florida story. Why are Reason writers so afraid of/obsessed with DeSantis? Or are they genuinely obsessed with Florida for some reason?
They want to “fix” Florida to be just like CA, NY, DC so they can move to a warm place without culture shock.
But the gators and pythons have other ideas.
Sad
Except this comes out in favour of what the legislature is doing…
The Reason Kochbot that determines which articles topics will be assigned to which editor has DeSantis Derangement Syndrome.
When I was young most of Florida’s coastal properties exempt the southeast were small bungalows and mom & pop motels.
People new not to build expensive buildings on the coast.
Now in many places (PCB) you can’t even see the water due to the back to back condos.
The Outer Banks in North Carolina used to be undeveloped due to the known risks from hurricanes. Some developer in the 1930s (?) got the land and convinced city folks that would be a swell place to have a vacation home. A surge of development followed.
“Benefits assignment” terms should be entirely a matter for the policy issuer and policy purchaser to negotiate. Legally forbidding third-party assignment is no different in principle than legally requiring it.
Insurance is at crises levels here in Florida.
Property valuations are high and rising further with the real estate boom happening now.
Replacing an expensive property is expensive.
The insurance companies try to pay pitifully low amounts.
To collect on your insurance, the companies force customers to sue their own insurance company.
Of course Citizens and all the other companies have lots of lawsuits.
Since they refuse to pay legitimate claims
Bingo. Just ask any of the homeowners affected by Ian who are living in trailers for months on end because their insurance company is dicking them around on paying out their totally legitimate claim.
Not to say that Florida doesn’t need significant tort reform. You can’t swing a dead cat without hitting a sleazy, ambulance-chasing lawyer down here.
Problem is here —————-> “state-sponsored insurance policies”
Certainly a state run insurance company isn’t a free market, and contributes to the problem, but the author points out the huge number of outstanding lawsuits and assignment of benefits claims to contractors as also an issue which is easy to see as driving up repair costs. I didn’t see anything about the National Flood Insurance Program adding to costs or enabling development of properties on dangerous places, which is also a contributor to the problem (one only needs to read this magazine’s articles covering it which makes me wonder if the author failed to research this or has read much of Reason’s articles on the subject).
The trial lawyers like to get in bed with legislators to write the laws to gin up lawsuits, so they get more business, which I also think is part of the problem here.
I’d like to thank the author for their research and writing an article informing us about the problem, though it seems simplified.
Our legislators KNeW that insurance companies were committing fraud. They also knew that insurance companies were not playing fairly. And, FL took away (basically) the ability to sue the insurance company.
This article suggests that homeowners are responsible or being litigous. The data doesn’t show that.
The insurance companies that have gone out of business didn’t cite litigation. Also, it was roof scams a couple of years ago… that ins claimed was the issue. So, FL ins CO’s demanded new roofs.
The ins companies got handed everything on a platter, all at the expense of policy holders.
An attorney now comes out of your house proceeds. And, a bad faith claim (if anyone ever gets that far which seems highly unlikely) takes a second lawsuit. So, the claims will never see the light of day.
Washington Post and the Insurace Journal both have articles on ins CO’s changing adjusters’ estimates and low balling homeowners. And, if you really want to be disgusted, check out the Florida channel on 12/13/22. The house commerce committee. You can watch/ listen for free and see homeowners and adjusters speak. (Ah…. Gordon Lee is in the Washington Post article. And, Rep Rommel … well you can read his tall tale in the WP.) If you watch/ listen to this, you will have a different view of FL insurance, all together.
• 1/7th of repair cost offered on a tornado claim
• adjusters’ estimates falsified
-” A hurricane claim denied b/c of covid
• Years without payment
• $200,000 out of pocket (not including attorney)to get ins to do what it should under the contract
Seriously… 13 companies were fined for not providing litigatioon info to the state.
There is no proof that this is the issue… except… fl does have more complaints to regulatory bodies than any other state (not lawsuits- conpkaints). So, someone please explain why consumers lost their rights?? Please.
Your counter narrative blaming the insurance companies for not doing good business doesn’t explain why so many insurance companies are leaving the state and foregoing earning money in FL.
IMHO, the government created incentives to build where it doesn’t make economic sense to build, considering the risks. After all, “Of the $165 billion in natural disaster–caused damage the U.S. experienced in 2022, $116 billion of it was in Florida.” Now people are living in expensive beach side properties that are expensive because of the insurance risks which the government subsidized (National Flood Insurance Program and likely subsidies in one form or another such as what you claim they do) and now the bill is coming due.
It’s funny so many people want to live on the beach, when Al Gore told us sea levels will rise, which tells us they don’t believe him. Obama included.
Laboratories of democracy…so…stay the hell out of Florida.
Actually, it is taking steps to address its problematic homeowners insurance market, aiming to streamline the resolution of disputes and reduce the millions spent on litigation after hurricanes. A positive change is on the horizon. Besides, determening health insurance hinges on personal needs, budget, and coverage offered by plans. Factors like premiums, deductibles, and network coverage play a vital role. When considering options, evaluating how does health insurance work when switching jobs is important. It involves understanding enrollment grace periods, some options, and exploring marketplace plans. Researching and comparing options based on individual circumstances can help find the most suitable coverage.