The Florida Legislature begins its 2020 session this Tuesday, January 14 amid growing concern about the state’s property insurance market. Two carriers have failed in recent months. Others are seeking rate increases of up to 30% to stem rising reinsurance and litigation costs. Future financial ratings downgrades on some Florida domestic insurance companies are also likely.
There are other insurance issues facing lawmakers as well, including automobile Assignment of Benefits (AOB) reform, bad faith, ongoing Hurricane Michael recovery, and a proposed change to the state building code. There are also big ticket issues, such as education, the environment, and transportation, as part of a proposed $91.4 billion budget.
Host Lisa Miller, a former deputy insurance commissioner, talks with Jim Saunders, Executive Editor of the News Service of Florida for a preview on what to expect this session.
Property Insurance Market – Saunders and Miller discussed the significance of rising reinsurance costs on the homeowners insurance market. One domestic carrier, Edison Insurance of Boca Raton, is seeking a 21.9% statewide average rate increase in its homeowners multi-peril line. Growing operating losses by some companies prompted state Senator Jeff Brandes (R-Pinellas) to describe Florida’s property insurance market as “rapidly declining” and as the most underreported issue going into the 2020 state legislative session.
“This is something we really need to get up to speed on because it’s not just a business issue, it affects me, you, and everybody else who owns a home if nothing else,” Saunders told Miller. He noted there are political ramifications of property insurance that are “far different” in South Florida than they are in inland and northern Florida.
Automobile AOB Reform – The ongoing effort to reform growing AOB abuse in automobile windshield repair and replacements got off to a shaky start in the committee weeks leading to the session.
“I tend to think that it’s a very live issue still,” said Saunders, despite the Senate Banking and Insurance Committee voting it down in December 2019. “It’s not going to be a death-knell” to the reform efforts this session he said, noting the House has been very aggressive with AOB issues in the past.
Host Miller said it’s an issue needing to be addressed. She shared a recent automobile AOB case involving a $64 windshield replacement. The insurance company paid the standard $60 fee, but the $4 difference is now the subject of a lawsuit. “It’s insane, make no mistake,” Miller said.
Litigation & Bad Faith Reform – Saunders and Miller discussed the potential of Bad Faith law reform passing this session and the Governor’s reference to “factories of lawsuits” which are impeding the state’s economic development and prosperity.
“I didn’t get the sense Senate President Bill Galvano has much appetite at all for tort issues during a recent interview,” said Saunders, but “I don’t doubt the Governor and Florida House would be amenable to it.”
Miller and Saunders also discussed the changing composition of the Florida Supreme Court in the past year and the expectation it will produce more favorable rulings for business and insurance interests. “The old court was not friendly to insurance companies, as a diplomatic way to put it,” said Saunders.
Miller brought up another property insurance company with a recent 28% rate increase request that attributed about 60% of that rate hike to growing legal expenses and fees.
“One of the driving forces of those fees is the fee multiplier, approved by the previous state Supreme Court in 2017. You see a judgment for $10,000 but you’ll see a fee award for $150,000 to $200,000, sometimes $300,000,” Miller said. She predicted double-digit rate requests will continue and eventually reach the point where the legislature will respond.
Hurricane Michael – The surprising amount of damage from the October 2018 Category 5 hurricane that still exist today in Panama City and especially in outlying rural areas was also discussed on the podcast. There are bills filed this session seeking additional financial relief to communities to help rebuild damaged infrastructure, including schools.
“I’m not sure how much traction any of the Michael issues will get this year because there’s a lot of demands on the state budget this year. And if you listen to some of the folks out in the Panhandle, they’re kind of worried that they’ve just been forgotten,” said Saunders, noting it was despite efforts by Panhandle legislators to keep up the pressure for more state aid.
Building Code – There’s also a bill that would mandate the Florida Building Code require that the entire envelope of certain buildings being constructed or rebuilt be impact resistant and constructed with high wind-resistant construction materials, together with meeting testing criteria.
The differing wind standards of the Panhandle versus other areas of the state has been under debate again since Hurricane Michael. (See Episode 21 – Is Florida’s Building Code Protecting All of Us? and Episode 22 – Why the Panhandle Wasn’t Hurricane Strong for Michael). Saunders and Miller discussed whether the legislature has the appetite to change the building code this session.
“Although more recent building using current codes survived Michael’s winds, older buildings built under older code often didn’t,” said Saunders, who called the state building code “a complicated animal” to change.
“It’s politically difficult, but it’s also technically very difficult, so whether that’s going to become a priority for legislative leadership to really dig into this year, I’m not sure,” he said.
Host Miller agreed. “I think they have so many competing interests and they just think the building commission is going to take care of it or the builders are going to take care of it, and so they can just move on to something else,” she said.
Saunders and Miller also discussed the big ticket issues facing the legislature this session. They include the Governor’s requested $900 million in spending for teacher raises and bonuses, $635 million for Everglades’ restoration and other water resources, increases in transportation and prison spending, criminal justice reform, and strategic tax cuts.
Links and Resources Mentioned in this Episode
2020 Bill Watch (Lisa Miller & Associates)
Lisa Miller & Associates Assignment of Benefits (AOB) webpage
Home insurer seeks $30 a month average statewide price hike (Sun-Sentinel, December 30, 2019)
Florida Homeowners Insurance Market Update (Federal Association for Insurance Reform, January 6, 2020)
More Than a Dozen Florida Insurers Facing Ratings Downgrades (Insurance Journal, January 9, 2020)
Viewer Discretion Advised (LMA Newsletter of January 6, 2020)
Three New Justices Seated on Florida Supreme Court (LMA Newsletter of February 4, 2019)
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