The state of Florida has been struggling to determine what an adequate amount of property insurance is for policyholders and has been a hotbed for litigation. Florida Insurance Commissioner David Altmaier recently pointed out that Florida accounts for 76.45% of all homeowners’ lawsuits opened against insurance companies in the U.S. in 2019, even though the state only accounted for 8.16% of all homeowners insurance claims filed that year. In 2020, eight counties in Alabama, Florida and Louisiana accounted for half of the federal flood insurance claims payments which rose from a series of storms that caused major damage during the record-breaking Atlantic hurricane season.
Existing insurers have been taking a step back and reducing their exposure in areas where there is high litigation rate or high reinsurance costs. Four companies have closed for new business, 12 created strict underwriting restrictions and others are offsetting their losses with rate increases. In response, insurer of last resort Citizens Insurance stepped in to provide Floridians with thousands of new policies per week and is expecting to reach a policy count of 700,000 by the end of the year. Since, Citizens has been seeking approval by the Office of Insurance Regulation (OIR) to charge new policyholders actuarially sound rates instead of allowing them to join the insurer with capped premiums that existing policyholders receive, as the carrier was growing too fast and its overall financial situation was “unsustainable.” The recommendation would increase rates for new business by an average of 21%.
On April 30 2021, the Florida Senate passed a bill that addressed litigation cost drivers in the property insurance market, as current homeowners have been paying more for their policies while simultaneously suffering massive losses. This bill tackles roofing claims abuse and addresses excessive litigation facing insurers by requiring detailed notice of property insurance claims prior to litigation and changes how attorney fees are awarded. The OIR also denied Citizens’ request stating that all policies are subject to price caps set by the state law.
In May, Florida Insurance Commissioner David Altmaier signed consent for three insurers to drop more than 50,000 homeowners policies as an extraordinary remedy to stay solvent in the state. Universal Insurance Co. of North America is dropping 13,294 personal policies, Gulfstream Property & Casualty is cancelling 20,311 personal residential policies, and Southern Fidelity Insurance Co, was approved to nonrenew approximately 19,600 residential policies within the next 14 months.
Read about other insurance-related bills about how the state plans to manage high risk situations that have been under discussion here.