A new Florida law and proposals have the potential to reduce the cost of homeowners insurance in the state, according to the Insurance Information Institute (Triple-I).
“Reforms put in place in the closing weeks of 2022 and proposed in the first quarter of 2023 suggest Florida is now quite serious about fixing the fraud and legal system abuse that have contributed to the state’s insurance crisis,” stated Addressing Florida’s Property/Casualty Insurance Crisis, a Triple-I Issues Brief which built on one Triple-I released about Florida’s homeowners insurance market in August 2022.
It will take years for the impacts of fraud and legal system abuse to be wrung out of the system and for policyholders to experience premium benefits.
Job 1 is to “stop the bleeding” as insurers fail, leave the state, or stop writing critical personal lines coverages like auto and homeowners.
Insurance reforms in Florida will lead to relief of homeowners insurance market. The new laws include the elimination of assignment of benefits and the one-way attorneys’ fees rule for property claims and reduces the amount of the time to 18 months in which a supplemental claim can be filed.
Should the measures eliminating assignment of benefits and one-way attorneys’ fees for property claims prove effective, they could materially lower insurers’ defense and cost containment expenses.
Additionally, the reduction in the amount of the time to file a supplement claim could alleviate concerns in the insurance-liked securities market about capital becoming trapped for long periods.
At the same time, judicial challenges to the new laws can be expected, and until the courts rule, national writers likely will remain wary of the environment in Florida.
The Florida state Legislature passed Senate Bill 2A in December 2022. It was signed into law soon thereafter by Gov. Ron DeSantis. Florida’s governor was joined this week by Senate President Kathleen Passidomo and House Speaker Paul Renner to announce additional reform proposals aimed at reducing instances of fraud and legal system abuse.
Florida accounts for nearly 80% of the nation’s homeowners’ insurance lawsuits yet only 9 percent of all U.S. homeowners’ insurance claims are filed within the state.
According to Florida’s Office of Insurance Regulation, it is one of the main reasons Florida’s homeowners insurers cumulatively incurred net underwriting losses of more than $1 billion in both 2020 and 2021.
Six insurers who conducted business in Florida became insolvent in 2022 and others either left the state or limited the number of new homeowners insurance policies they sold, Triple-I reported.
Legislation approved during Florida’s late 2022 special session eliminated “one-way attorney fees” for property insurance claims.
Before the reform, state law required insurers to pay the fees of policyholders who successfully sued over claims, while shielding policyholders from paying insurers’ attorney fees when the policyholders lose.
The legislation also eliminated AOBs [assignment of benefits] – agreements in which property owners sign over their claims to contractors, who then work with insurers.
AOBs are a standard practice in insurance, but in Florida this consumer-friendly convenience has long served as a magnet for fraud.
The state’s legal environment – including some of the most generous attorney-fee mechanisms in the country – has encouraged vendors and their attorneys to solicit unwarranted AOBs from tens of thousands of Floridians, conduct unnecessary or unnecessarily expensive work, then file lawsuits against insurers that deny or dispute the claims.
Triple-I’s Issues Brief explains how Senate Bill 2A took effect in 2023 and its provisions are not retroactive. As such, the disputed insurance claims resulting from 2022’s hurricanes Ian and Nicole will be processed under the laws which were in place at the time those storms made landfall in Florida.
Boat renters and rental operators will face new insurance requirements in Florida from the start of 2023, and insurance businesses have leapt in with new products to plug the gap in the state and further afield.
Three words in Florida’s Boating Safety Act, “and the renter”, have reportedly caused insurance driven consternation for watercraft rental businesses.
Under new rules, boat liveries must demonstrate that they and renters of their vessels have valid insurance cover from January 1 to obtain annual permits. As per requirements, operators and their customers must have cover of at least $1 million per occurrence and $500,000 per person when the vessel is being rented.