Florida homeowners will probably have to continue riding out a turbulent property insurance market on their own for the next year after state lawmakers ended their annual legislative session without enacting any reforms.
House and Senate leaders couldn’t agree during the roughly 60-day session on a solution to relieve homeowners of double-digit rate increases, so they passed nothing.
“Bottom line: Homeowners lost, and that’s what troubles me,” said Sen. Jim Boyd, R-Sarasota, who sponsored the main property insurance reform bill in the Senate.
Short of calling lawmakers back to Tallahassee for a special legislative session to address the problem — which some senators said was a possibility — homeowners can expect no new relief to their bills in 2022.
The property insurance industry is widely believed to be in crisis. Homeowners’ rates have been going up by double digits the last few years, and more than a dozen companies have recently suspended new business in Florida, limited the types of homes they cover or canceled policies outright. A handful of companies have gone out of business in the last two years.
Multiple lawmakers said this year that rising property insurance rates were one of the most common complaints they were hearing from constituents.
When asked Monday about the Legislature’s failure to pass a property insurance bill, Gov. Ron DeSantis pivoted to discuss the rising costs of inflation, which he has frequently blamed on President Joe Biden and Congress.
“I supported a lot of the stuff the Senate was talking about on a variety of these things,” said DeSantis, who is running for reelection this year. “I stand ready to do even more, but people should just be prepared: The gas, the groceries, utilities, all these things are going to go up in an era of fighting inflation.”
Looking to roofs for a possible solution
One issue lawmakers had hoped to tackle was the high number of roof replacement claims that industry executives say are partly to blame for rising prices. Many companies say they are now refusing to insure homes with older roofs as a result of the number of fraudulent roofers who are going door to door convincing homeowners that they can file a claim to have their roof replaced.
Last year, lawmakers tried to limit the types of advertisements roofers could offer, but a federal judge temporarily blocked it.
This year, Boyd’s Senate Bill 1728 would have required roofers to inform homeowners that they’re responsible for paying any deductibles and alert them that it’s illegal for a contractor to pay or rebate the cost of the deductible.
It also originally would have allowed insurers to offer policies that would only pay the depreciated value of the roof, or an “actual cash value” — an idea that would almost certainly leave Floridians with older homes footing most of the bill.
That idea was dropped in lieu of requiring homeowners to pay a 2% deductible for roof replacements, something considered more palatable to lawmakers. For a $400,000 home, for example, the homeowner would have had to pay a deductible of up to $8,000, or 2%, to replace a roof, with the insurer picking up the rest. The deductible would not have applied if the home was a total loss or if the roof was destroyed by a hurricane.
Replacing a shingle-roofed home can cost anywhere from about $9,000 to more than $25,000 depending on the size of the home and shape of the roof.
“It wouldn’t fix the problem, but we thought it would help the problem,” said Boyd, who is an insurance broker.
The Senate passed the bill, but House leadership wouldn’t accept it. On Thursday and Friday, with time running out for the legislative session, negotiations hinged on the House’s insistence on modifying the deductible plan. They wanted it to be optional for insurers, not mandatory.
It’s already optional for insurers, though, Boyd said. “It just wouldn’t have made any difference to the problem.”
House Speaker Chris Sprowls, R-Palm Harbor, said he had serious questions about the Senate’s 2% deductible plan, including whether it would make any difference to homeowners’ rates.
He raised a scenario of wind causing a tree to fall and destroy a homeowner’s roof.
“Does that mean you’ve got to pay 2% of your deductible, and really, it’s just sort of an act of God?” Sprowls said Monday. “I think that there’s a lot of issues like that.”
Litigation is an issue
Sprowls also noted that lawmakers passed a property insurance bill last year, and that insurers say it takes 18 months for such reforms to make much effect.
“It’s frustrating for me as a homeowner. It’s frustrating for a lot of people,” Sprowls said of skyrocketing rates. “But I want to make sure that we’re making the right reforms that are going to have an impact on the marketplace and don’t inadvertently have an adverse impact on homeowners.”
There are several reasons why some insurers are struggling. According to a 2019 Florida Office of Insurance Regulation study, the state made up 8.16% of all homeowners’ claims in the country, but 76.45% of the nation’s lawsuits. The cost of reinsurance, which insurers buy to cover their claims, has gone up. And some companies that have gone out of business appear to have struggled for everyday business reasons.
The industry’s woes are affecting consumers directly. After Orlando-based St. Johns Insurance went into receivership last month, the Florida Insurance Guaranty Association approved adding a 1.3% increased assessment on all policies sold in the state.
To Joe Petrelli, CEO of Demotech, which rates Florida insurers, the proposed legislation didn’t go far enough to deal with the amount of litigation in the industry.
“Absent meaningful and significant tort reform, everything else is a drop in a bucket and a Band-Aid,” Petrelli said.
Without that reform, Petrelli said he didn’t see things improving for consumers any time soon.
“I think it’s going to be disastrous all the way around, for consumers, insurance companies, modeling companies, rating agencies, and, of course, regulators.”
Senate President Wilton Simpson, R-Trilby, said there is a “possibility” that lawmakers will return for a special legislative session. The last time the Legislature went into a special session over property insurance was 2007.
“We were disappointed we couldn’t get more done this year, but that’s part of the process,” Simpson said last week. “And so we decided it would be better for the next Legislature to take that issue up.”