Data shows that the state of Florida carries an overwhelming majority of residential property insurance litigation, but the problem facing legislators and regulators is what to do about it, according to insurance analyst Guy Fraker.
Fraker points out in a recent column that the National Association of Insurance Commissioners (NAIC) found that, as a single state, Florida is home to 81.25% of these legal cases compared to only 18.75% for the 49 other U.S. states, raising questions as to whether claims are "manufactured or manipulated."
Ironically, Florida also hosts just 9% of unresolved court claims.
In 2021, the annual total residential property insurance claim caseload was 107,585 for Florida, 3,959 for California, 224 for Missouri 1,577 for New York, and 2,589 for Texas, according to NAIC data.
Fraker observes that the data has some bias due to Florida's more transparent and comprehensive insurance litigation reporting systems because of frequent flooding and weather events.
“This means national examination is challenged by the lack of equivalent capabilities among the remaining 49 states,” wrote Fraker, founder and lead consultant with Cre8futures LLC in a newsletter article titled 'How Disproportionate is Florida's litigation problem?'
Paying attention to the market share matrix - state-based premium and paid loss measures for instance - could help inform decision-makers.
“The results hold significant implications worthy of consideration by legislators, insurers, regulators, reinsurers, and insurance investors nationwide,” Fraker wrote.
Insurance ratings firm Demotech was first to share insights on the state's disproportionate share of litigation, he wrote, but the way the data is being used has perturbed Florida-based legislators and insurers.
Demotech, for example, threatened to downgrade the Financial Stability Ratings (FSR) of at least 17 property insurers, which would have impacted millions of Floridian homeowners.
“The remarkable and unsettling nature of these metrics presents a compelling case for deeper examination in order to begin addressing questions such as ‘What does a national share exceeding 80% really mean? How could these circumstances have come to pass? How can the economic impact of such litigation be quantified,’” Fraker wrote.
The FSR affects what kind of home loans buyers can obtain and some insurers can write policies only with the highest rating.
As previously reported in the Florida Record, Demotech delayed the threat of looming downgrades last month.
Critics then accused the company of using them to force the state Legislature to enact reforms designed to stabilize the troubled property insurance market.
“This is an example of inconsistent, monopolistic power of a select rating agency and is trying to exert coercive influence over Floridians and policymakers in an effort to thwart public policy according to its own opinions,” David Altmaier, Florida Insurance Commissioner, previously said.