Already a number of solutions have been suggested to try and solve Florida’s property insurance crisis, and lawmakers are expected to file more bill proposals next week.
However, very few legislative solutions would have an immediate impact on the market, according to FAPIA (Florida Association of Public Insurance Adjusters) President Chris Cury.
“I don’t think there’s any easy fixes here, at all, that don’t have consequences,” Cury said. “But laying this on the consumer is not a good idea.”
One type of solution could make quite an immediate impact, Cury says – for consumers and insurance carriers alike. Lawmakers could vote to address rising premium rates for reinsurance, including reinsurance from Florida’s tax-exempt Hurricane Catastrophe Fund, or CAT Fund.
Just like homeowners, insurance carriers are also required to have insurance for catastrophic events. That’s called reinsurance. Carriers purchase those reinsurance policies to help cover the first portion of their own policyholders' damage claims, following a major disaster.
When it comes to Florida’s home insurance crisis, local insurance agent Steve says his own industry is partly to blame, for failing to properly vet damage claims and build trust with policyholders.
But just like homeowners, in order to access that coverage, insurance carriers also must first pay a deductible. Today, the state’s CAT fund retention – essentially, its deductible – is $8.5 billion. And reinsurance rates are trending upward, Mark Friedlander of the Insurance Information Institute says – not just in Florida, but across the country.
“We’ve seen significant loss throughout the United States over the past several years,” Friedlander says. “It’s not just hurricane season. It’s wildfires, it’s tornadoes, it’s floods – many major hazards, impacting all regions of the country.”
One idea from U.S. Representative and former Florida governor Charlie Crist (D-St. Petersburg) proposes to address the reinsurance issue: by creating a low-interest, federal reserve fund to help state insurance commissioners cover their costs. That could ease up competition for Florida’s CAT fund, allowing more insurers to access coverage.
“This would be a massive, quick, quick fix for the market. I mean, it would be tremendous,” Cury said.
Another set of proposed solutions from Florida Chief Financial Officer Jimmy Patronis would address fraud in the marketplace, including by creating three new “anti-fraud homeowner squads” to cover Jacksonville, Fort Lauderdale and Miami.
Additionally, Patronis and others have proposed tightening Florida’s Assignment of Benefits (AOB) laws, so policyholders can’t sign their rights away so easily to unscrupulous contractors trying to take advantage of them. In 2019, Florida lawmakers took a big step toward this effort in passing HB 7065; it gives policyholders 14 days to rescind an AOB they’ve signed, without any penalty.
But some policyholders are still signing AOBs presented by unethical contractors – often, without even knowing it.
“A lot of the time what we hear is the [homeowners], they have no idea what they signed, they were never given a copy of a contract, and they didn't know there was a lawsuit filed,” Cury said. “Next thing they know, they get a settlement statement, and they’re bound to it by law.”
It’s why some would like to see Florida law make it harder for policyholders to sue their insurance carriers. But Cury says there’s risk in that, too: it would reduce consumers’ ability to redress legitimate damages.
“Anything that affects the consumer’s rights and doesn't really address the current crisis is very problematic,” Cury said.