Excessive litigation causing rate hikes
At Thursday’s Citizens Property Insurance Corporation public rate hearing, company President & CEO Barry Gilway told the audience it wasn’t the $2 billion in combined losses from Hurricanes Irma and Michael that are prompting a rate increase – it’s the man-made catastrophe known as Assignment of Benefits (AOB) abuse and other exploding litigation costs.
Gilway repeated what he’s said before – that if not for an increase in non-catastrophic water loss claims and AOB disputes that end up in court – Citizens would not be asking for a rate increase at all. Instead, it’s asking for a statewide average 8.2% increase from insurance regulators, particularly impacting its South Florida customers. The state’s insurer of last resort insures 23% of homes in Miami-Dade County and 50% of the wind exposure in Monroe County, which includes the Florida Keys.
“The bottom line is this: 97% of our HO-3 homeowners multiperil policyholders will see rate increases in 2019 because of costs related to non-weather water loss litigation. For 2019, we estimate that half of non-weather water claims will end up in litigation. If we could have held the 12% litigation rate that prevailed prior to the explosion of litigation that began in 2012, our homeowners’ multi-peril indicated rate increase would be reduced from 25.2% down to 1.5%,” said at the hearing held on the campus of Florida International University in North Miami.
In fact, if not for the increased litigation costs, HO-3 policyholders in the tri-county area of South Florida would have seen their premium decrease 2.9%! Although South Florida accounts for 57% of Citizens exposure, it accounts for 94% of all litigation claims. Nearly 60% of non-weather water claims there are expected to face litigation at this pace at a final cost that’s five-fold those of non-litigated claims.
Gilway said that fixing AOB abuse will not solve the costly problem entirely, but will require the legislature to also address the state’s one-way attorney fee statute, which he said “remains the real driver of higher losses and skyrocketing litigation costs.”
You can view more telling charts and read his presentation here.
LMA Newsletter of 3-18-19