Yes, Florida is vulnerable to hurricane damage, but so are other Gulf Coast states, and their property insurance markets are not in disarray. That’s because this crisis is man-made, having less to do with destructive hurricanes than with two other Florida trademarks: greed and fraud.
But first, let’s look at what Floridians face: skyrocketing property insurance premiums, up 25 percent from 2020 to 2021 on average, but in some cases tripling in one year, according to the Insurance Information Institute, a nonpartisan, nonprofit trade group that tracks industry trends.
The average cost of homeowner’s insurance in Florida was $3,600 in 2021, double the rate for the rest of the country.
That’s if you can even get insurance. In the past 12 months, more than 400,000 Florida home policies have been dropped, most of them in the past 90 days, according to the institute.
One insurance holding company this week announced 68,200 cancellations. Three other companies have been declared insolvent this year. Florida insurance underwriting losses are projected at more than $1.6 billion for 2021.
“It’s the most volatile property insurance market in the country, and it’s headed for collapse,” says Mark Friedlander, the institute’s spokesman. Cue the special session.
The problem begins with unscrupulous roofers. They show up uninvited on doorsteps (one rang my doorbell last month) and offer owners a pitch: If a roof is 25 percent damaged — that’s when Florida coverage kicks in — they can wrangle you a free roof from your insurance company, even if a storm wasn’t the cause.
All a homeowner needs to do is sign off on allowing contractors to collect directly from the insurance company. This allows corrupt roofers to overcharge companies for a roof that is being needlessly replaced. Roofers pocket the extra money, and homeowners get a new roof.
Then, there’s runaway litigation if a claim is denied or disputed. Florida has 9 percent of the country’s property claims, but it accounts for nearly 80 percent of the nation’s property insurance lawsuits, according to the Office of Insurance Regulation.
Why? Because Florida law allows plaintiff lawyers to be awarded 2 to 2½ times their usual hourly rate for property insurance lawsuits. Talk about a plum incentive for lawyers — it gives a whole new meaning to hanging out a shingle.
Property insurers in Florida paid out $15 billion in claims costs between 2013 and 2020. Eight percent of the money went to consumers, and 71 percent went to lawyers.
Predictably, lawyers can’t file claims fast enough against insurance companies for denying or low-balling payments to homeowners.
This contingency fee multiplier rate is supposed to be a seldom-used tool, but a 2017 Florida Supreme Court ruling made it routine. Now insurance companies often settle rather than take the potentially much more expensive risk of going to court.
All of this chaos has made private insurance companies reluctant to take new clients. Many homeowners have no choice but to enroll with Citizens, Florida’s state-run, nonprofit insurer.
Funded by premiums and taxpayers, Citizens was designed to be a last-ditch insurer, yet it is now the largest in Florida. The 420,000 policies it had in October 2019 have more than doubled. Soon it will top 1 million, according to the insurance institute. If a large hurricane hits Florida, Citizens will quickly deplete its reserves — it had $166 million in underwriting losses last year — and taxpayers will have to make up the difference.
Plus, Citizens is limited: It only insures houses valued less than $700,000, or $1 million in Miami-Dade and the Florida Keys.
Those who do have private insurance often face new, arbitrary rules — such as requiring roofs to be younger than 15 years old — or risk being cut loose, even by Progressive and other large insurers.
The spiraling costs of property insurance have made Florida, one of the most expensive housing markets in the country, even more inaccessible, especially for first-time and middle-class buyers.
“This is a completely unsustainable trajectory,” state Sen. Jeff Brandes, a Republican who spearheaded the special legislative session, told me.
If the recalcitrant legislature wants to stop a storm of the state’s own making, lawmakers need to take meaningful action now. But first Republican House Speaker Chris Sprowls, who chose not to move forward on the issue, must make it a priority. Brandes said the House’s reluctance is simple to explain: Legislators — many of them lawyers themselves — don’t want to upset trial attorney donors.
The legislature needs to find a way to stop the tsunami of baseless lawsuits and routine roof scams. Or it could do next to nothing once again, just in time for the start of hurricane season on June 1.