A recently passed ban on assignment of benefits (AOB) in Florida property insurance litigation has caused the number of “intentions to litigate” to plummet by more than 50%, from 8,345 in March of last year to 4,064 in November of last year, a new study concludes.
Florida TaxWatch released its study of the state’s property insurance market on July 11, charting sharp changes in property insurance trends that led to a 42.5% rise in property insurance rates since 2019. Legal reforms passed by the Legislature in recent years seem to be producing more stability in the market, according to the report, but more needs to be done to help policyholders in the state, who pay the highest average premiums in the United States.
The money spent on the legal defense and cost containment of insurance claims in 2023, as a share of premium costs, was 3.1%, which represents the smallest ratio since 2019, the TaxWatch report states. But Florida legal costs related to property insurance remain above the national average, the study says.
“The high cost and availability of property insurance is an issue that impacts all of us, and Florida TaxWatch once again reminds policymakers that while initial measures in bringing premiums down and attracting insurance companies into the market – and ending frivolous lawsuits – show promise, it will take continued vigilance, so all Floridians have peace of mind, knowing they can obtain affordable insurance for their homes this hurricane season and beyond,” Florida TaxWatch’s president and CEO, Dominic Calabro, said in a prepared statement.
The study charts fluctuations in the state’s property insurance market over the past two decades, when a combination of severe storms and rising legal fees for insurers related to excessive litigation caused instability, rising rates, insolvencies and the state-sponsored Citizens Property Insurance Corp. taking on higher numbers of homeowner premiums.
“From 2013 through 2022, property insurers averaged an underwriting loss of 4.3%,” the report states.
In response, state lawmakers passed a number of legal reforms, including the AOB prohibition, which bars policyholders from signing over their policy rights to third parties such as contractors. Other new laws include limits on the application of one-way attorney fees – which benefited plaintiffs – and strict limits on the use of contingency fee multipliers.
Mark Friedlander, spokesman for the Insurance Information Institute, agreed that the Sunshine State has made progress in strengthening the confidence of insurers.
“We are seeing significant improvements in the Florida property insurance market due to the impacts of legislative reform that addressed the two man-made factors which caused the Florida risk crisis – legal system abuse and assignment-of-benefits claim fraud,” Friedlander said in an email to the Florida Record. “While Florida insurers are still seeing impacts of a mass volume of property-claim lawsuits filed in prior years, a sharp decline in new first-party and third-party lawsuits is reducing insurer defense and cost-containment expenses.”
In addition, statistics show that insurers are passing along the savings their seeing to customers, he said.
“Overall, the statewide average rate filing this year with the insurance regulator is under 2%, the lowest average increase in the U.S.,” Friedlander said.
The Florida TaxWatch study also points to signs of progress in stabilizing the market. In the wake of the legal reforms, eight new insurers have entered the Florida market. In addition, 10 companies have declined to seek rate increases, and 10 indicated they decreased rates as of this year, according to the report.
The number of premiums covered by Citizens, however, remains high, at 17% of the state’s total, though the state-run insurer was able to transition more than 200,000 policies to private companies last year.
Another statistic that Florida TaxWatch found troubling is that as of 2022, Florida accounted for 71% of the nation’s total litigated property insurance claims, even though total homeowner claims in Florida were just 15% of the U.S. total.
The state’s average annual homeowner insurance premium now stands at $6,366, according to Florida TaxWatch. But the national average for annual premiums is $2,153 – more than $4,000 below Florida’s average, the report says.