While campaigning for president, Florida Governor Ron DeSantis says he wants to “make America Florida.” But homeowners might say, huh, no thanks, since no one wants the kind of insurance bill Florida homeowners found in their inboxes.
The average premium for homeowners insurance in Florida has reached $6,000 per year for 2023, compared to just $1,700 for the country as a whole, according to the Insurance Information Institute. Premiums in Florida have soared 42% in the last year alone and 206% since DeSantis won the governorship in 2018.
They are by far the highest in the country.
Florida home values are only the 18th highest in the nation, according to Zillow, so expensive real estate doesn’t explain the nation’s highest home insurance rates. The state, of course, is battered by hurricanes and other types of extreme weather and that’s having an impact. But that, surprisingly, isn’t the biggest problem either.
Instead, Category 5 fraud and abuse has made the Florida home insurance market so unprofitable that 15 carriers have gone insolvent in the state since 2020 — and others are refusing to make deals there. business. “This is a man-made disaster,” says Logan McFaddin, vice president of state government relations at the American Property Casualty Insurance Association. “It’s not just the weather. These are frivolous litigation and fraud.
After years of dawdling, the Florida Legislature passed a slate of insurance reforms in 2022 and this year, which DeSantis backed and signed into law. The insurance industry hailed the legislation as key to attracting carriers to the state and lowering costs for consumers. But there will likely be years of legal challenges ahead, and the premiums could still go up before they start falling.
Critics say DeSantis should be doing more to help Florida homeowners now instead of campaigning out of state. This promises to be a handicap for DeSantis if his presidential campaign gains momentum and he becomes a strong contender for the Republican nomination.
DeSantis should have a strong case to run on given that Florida is the fastest growing US state and vastly outpaces the US economy. But the governor’s record leaves some explaining to be done, including the problems DeSantis created for himself. His battle with Disney Corp. began as a culture war conflict. But it turned into a giant legal battle pitting the governor against the state’s biggest taxpayer, Disney CEO Bob Iger, calling DeSantis “anti-corporate.”
Meanwhile, a law DeSantis signed in May dealing with illegal immigration has caused an exodus of workers that is hurting farm owners, construction companies and other types of businesses.
Florida’s insurance troubles predate DeSantis.
Extreme weather conditions linked to climate change are driving up insurance costs in many regions at risk, including Florida and other states vulnerable to storms, floods, fires and drought. But insurance costs in Florida are significantly higher than in other disaster-prone states, and no one addressed the causes of Florida’s insurance crisis during DeSantis’ first term as governor.
Florida has long been a haven for con artists, with laws that make insurance companies especially vulnerable to lawsuits. Until recently, Florida had “one-way attorney’s fees,” which meant insurers had to pay the legal fees of any policyholder who sued and won, while insurers had to pay their own legal fees if they sued. they were winning. Another quirk of Florida law was the ability for policyholders to “assign” benefits to a third party, such as a contractor, who would sue the insurer on their behalf, sometimes without the knowledge of the policyholder.
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This “toxic legal environment,” as a recent industry report put it, has created a climate for unscrupulous lawyer-entrepreneur partnerships. The contractors told the owners they could get cheap or free repairs, even if they weren’t necessary, claiming that a weather event caused the damage and suing the insurer if they found otherwise and refused to pay. Many insurers would settle, knowing that they would have to pay the other party’s legal fees if they lost. Others would go to court and risk paying the legal fees. Trial attorneys have become adept at raising their fees and sharing strategies with contractors on how best to prevail in court.
The practice became widespread after Hurricane Irma in 2017, when insurance claims were much higher than expected for a storm of this magnitude.
It emerged that the contractors, encouraged by the trial lawyers, were encouraging the owners to do the work, in particular the roof replacements, and to blame Irma, even if these houses had suffered little or no damage from the storm. There have even been allegations that some contractors trample on roofs with battens to rip shingles and simulate storm damage, then charge the insurance company for a full replacement.
Billboards for storm damage attorneys and public adjusters who assess the extent of storm damage began to proliferate.
Insurance litigation has skyrocketed, with the recent industry report revealing that Florida accounts for 7% of all home insurance claims – roughly comparable to its share of the US population – but 76% of all lawsuits involving home insurance policies. Insurance companies normally pass higher costs on to customers, and premiums began to climb in 2020. A 2021 report by Guy Fraker of the James Madison Institute estimated that legal fees alone cost the typical family from Florida $487 more per year in 2019, with an annual report. 26% growth rate. This “hidden tax” would represent more than $1,200 per family in 2023.
The Fraker report stated that “Florida’s P&C Insurance [property and casualty] the market is in freefall, as if it were not viable.
Besides skyrocketing premiums and bankrupt insurers, this manifested itself in two other ways. First, a state-backed insurer, Citizens Insurance, which is meant to be an option of last resort for people who can’t get coverage from homeowners any other way, has become the state’s largest issuer. . And second, reinsurance companies, which insure insurers, have started bailing out Florida or severely limiting coverage. All in all, a private sector insurance market cannot function if litigation losses appear limitless and if reinsurers find it too risky to operate.
After Hurricane Ian hit Florida last fall causing widespread damage, the Florida legislature convened a special session in December to address issues in the insurance market. He passed several reforms that DeSantis quickly signed into law, including the repeal of one-way attorney fees and a new ban on ceding benefits to a third party, which the insurance industry applauded.
There are cautious signs that the reforms are working, with reinsurers renewing at higher rates in 2023 than in 2022, for example. “Global reinsurers are showing greater confidence in the Florida property insurance market due to recently passed reform bills,” Mark Friedlander of the Insurance Information Institute told Yahoo Finance.
But even proponents of legislative reform say rates for Florida homeowners won’t drop for a year or two, at best. Before the reforms take effect in early 2023, there has been a flood of new lawsuits against insurers that will continue under the old rules. It could take several years for these lawsuits to clear the system, and the additional costs they represent will be passed on to policyholders as usual. Another change intended to stabilize the system requires buyers of a Citizen policy of last resort to also purchase flood insurance, which increases the outlay.
As bounties continue to soar, critics say DeSantis needs to do more. “You could see the Governor and the Legislature running around like their hair is on fire, trying to come up with solutions for our crippled insurance market,” the Miami Herald’s editorial board said on June 10. “In 2023, Florida leaders are so busy trying to get Governor DeSantis into the White House that they can’t be bothered.
The Herald also chided DeSantis for prioritizing theoretical anti-awakening issues over real pocketbook pain and for campaigning in Texas and Iowa instead of taking care of business at home.
Maybe there should be insurance coverage for that.
Rick Newman is a senior columnist for Yahoo finance. Follow him on Twitter at @rickjnewman
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