By Jim Kallinger, Chairman of the Small Business and Consumers Alliance
It looks more and more like steady premium relief for your property insurance policy may be on the way.
After reading the previous line, you may be wondering how.
To understand, let me provide a quick history lesson. Over the last two decades, Florida’s insurance marketplace has shown significant cracks. Premiums skyrocketed, and the number of homeowners driven to Citizens Property Insurance, the state’s insurer of last resort, grew exponentially.
As a further effect, this has created obstacles for the real estate industry and barriers to home ownership, with further impact felt in the construction, banking, and retail sectors. The trickle-down impact on restaurants, lodging, and service industries can also be measured and felt. Furthermore, because Citizens Property Insurance is backed by the taxpayers of the state of Florida, more risk assumed by this quasi-public company is a financial risk for every taxpayer in the state should it ever hit a solvency crisis.
The summary is this: a property insurance crisis in Florida stifles almost every aspect of our economy.
Some would suggest that these cracks were caused by the fact that we live on the leading edge of America’s storm corridors. Certainly, hurricanes have something to do with any increase in insurance premiums. But there are other even more significant factors, specifically fraud, inflation, and litigation.
Fraud is unpredictable and immeasurable, and in south Florida particularly, the amount of property insurance fraud has been extensive. It is one of the worst markets in the country, and if fraudulent claims in South Florida go unchecked, it makes insurance costs for everyone in the state to rise.
Inflation is beyond our control as well, and the best thing that has happened in this regard is the election of a conservative President and Congress. If runaway federal government spending slows down, then inflation slows down. If it costs 25% more to replace a home now than it did 4 years ago, then we should expect our insurance costs to rise accordingly.
Litigation is something we can and have done something about. In 2023, the Florida legislature and the governor passed sweeping litigation reform to stop frivolous lawsuits from becoming surprise expenses for the insurance market. Essentially, Florida had become a litigation hellhole according to many national analysts where any claim filed against an insurance company essentially required the insurer to pick up the tab for settled attorney fees. In many cases, the fees were much larger, exponentially larger, than the settlements themselves. Putting some curbs on this activity has created for the first time a levelling off and even a downward shift in premium rates for some policyholders.
In the past year, more insurance companies are filing the necessary paperwork to do business in Florida. The additional competitive forces are having a wonderful effect on the market, and so we know those litigation reforms are helping in a big way. We do not need to retreat from them now. In fact, there may be other things we can do to bring some commonsense back into the courtrooms and stop frivolous lawsuits more significantly. We also need to continue to strengthen penalties for insurance fraud. It is theft – not just from the company – but from all of us who pay insurance premium.
Elections have consequences, and leadership does have an impact on our economy. If the national conservatives hold the line on inflation, and if conservatives at home hold the line on fraud and litigation, Florida’s insurance may be getting an evaluation of good health in the very near future and for many years to come.
