Jake Holehouse of HH Insurance
I follow several Florida insurance agents and their dedication to their customers and the overall insurance market. One of these agent leaders is Jake Holehouse whose dad was an icon in the industry. I have known Jake since he was in his teens and he is working hard to raise the awareness of what is happening to Floridians facing ever higher insurance rates.
On LinkedIn, Jake posted the obvious question of “When will homeowners rates decrease?” He answered that with the below article.
Asking the question of when homeowners rates will decrease is a function of reinsurance pricing. In recent years, Florida’s insurance and tort laws have undergone multiple adjustments in an effort to reduce claims litigation and lower property rates. Despite these changes, industry professionals argue that a crucial element is still missing: an affordable and effective state-run reinsurance layer that could have an immediate impact on costs.
As the 2023 regular session of the Florida Legislature draws to a close with just two weeks remaining, no bills addressing this issue have been introduced, diminishing the likelihood of lawmakers supporting the idea. Recent criticism that tort-reform and insurance rescue laws may be perceived as too “insurer friendly” might have lessened legislators’ interest in pursuing additional insurance assistance packages. Although the deadline for introducing new bills has passed, there is a possibility that a reinsurance measure could be added as an amendment to another bill before the May 5th deadline.
A white paper circulated by reinsurance and insurance industry professionals explains that reinsurance costs for several Florida-based carriers increased by up to 60% in January. With June 1 renewals approaching, costs are expected to rise again while reinsurers’ coverage continues to shrink. A proposed temporary state program, the Florida Insurance Rate Reduction Mechanism (FIRRM), could help avert further insurer insolvencies and potentially save Florida homeowners up to $2 billion annually, or approximately 15% for the average policyholder.
Despite these concerns, critics argue that Florida lawmakers have, in fact, offered two state-backed reinsurance programs in the last 12 months: RAP (Reinsurance to Assist Policyholders) and FORA (Florida Optional Reinsurance Assistance Program). However, neither program adequately addresses the needs of Floridians who desperately need to see a hard stop of rising rates. RAP did not provide enough coverage, and FORA was deemed too expensive without offering sufficient coverage at the bottom of the reinsurance tower, with only 3 insurance companies choosing to pursue. As market rates continue to soar, these programs offer little assistance.
Since 2019, Florida lawmakers have approved six significant insurance measures, but the legislature has publicly estimated it could take another 18 months for the most comprehensive reforms to translate into lower rates for consumers. Unfortunately under prior Florida House of Representative’s leadership, Florida was very handcuffed on meaningful reform. However, with Speaker Renner, we finally had the meaningful needed reform, but we now need short term relief for consumers and especially those on a fixed income who are feeling the failure of prior meaningful reform from 2016 to 2021.
One of the recent reforms that will have a long term impact is Senate Bill 2A that is having an impact on claims litigation in Florida. Some carriers report that in the first three months of 2023, they have encountered half the number of lawsuits compared to previous years for the same period. Carriers are also seeing a 40% decrease in broken pipe claims showing that either the pipes in Florida either stopped failing immediately after the legislation or shows the amount of questionable attorney-represented claims that were being filed – driving up everyone’s rates. However, the anticipated increase in reinsurance costs may offset the benefits of reduced litigation resulting from recent reforms such as Senate Bill 2A.
Inadequate levels of reinsurance coverage could lead to financial ratings downgrades, potential insolvencies, and even higher premiums for policyholders. Despite recent concerns from real estate interests that higher insurance premiums are adversely affecting home sales in some parts of the state, few have advocated for reinsurance legislation this year. Floridians need short term rate relief and the legislature can easily include FIRRM in legislation moving through the process.
LMA Newsletter of 4-24-23
