New concerns from real estate agents
Photo by RODNAE Productions from Pexels
Beside their direct impact on Florida homeowners, the dwindling number of carriers and the multiple double-digit rate increases in property insurance we’ve seen are impacting Florida’s real estate market as well. There’s new concern they will affect the availability and affordability of insurance for new homebuyers. I had the opportunity to talk recently with members of the Pensacola Association of Realtors about the factors driving this, including increased insurance litigation. There was a lot of agreement in the room on the impact on their clients.
Our discussion was a couple of months before the Florida legislative session began, but I shared with them how rising litigation and reinsurance costs are forcing the state’s 56 domestic homeowners insurance companies to either reduce expenses or raise rates and some solutions the legislature can consider. One big cost-saving idea I shared was reducing the cost of reinsurance our carriers purchase from the Florida Hurricane Catastrophe Fund. Since then, Senator Jeff Brandes has offered an amendment to a bill in the 2022 legislative session that would do just that. It would:
- Cut the threshold level of losses in half that all insurance companies in total have to meet before drawing a payout from the Fund; and
- Suspend the Rapid Cash Buildup Factor, known as the “hurricane tax” on insurance companies that they in turn pass to their policyholders, designed to help the Fund grow.
Senator Brandes argued that lowering the threshold or “aggregate retention point” would lower the cost of reinsurance, with the savings under his amendment to be passed along to policyholders. Suspending the hurricane tax would save every Florida residential policyholder an estimated $150 annually.
I also shared with the group how you can settle an insurance claim without a lawyer. I reminded them that the DFS Division of Consumer Services has an insurance consumer helpline offering free help to any policyholder who faces challenges dealing with their insurance company and that it has a high rate of success settling disputes. But many times now, people file a claim and the first thing they do is hire a lawyer. We know the cottage industry of the top 20 law firms responsible for the majority of homeowners claims lawsuits in the state, currently numbering about 100,000. You can listen and read more about our discussion in the latest Florida Insurance Roundup podcast.
Another reason this matter to real estate, a lifeblood of Florida’s economy? Because news of our property insurance mess is getting out to the rest of the country. The New York Times recently penned Extreme Weather and Rising Insurance Rates Squeeze Retirees. It included an interview with the president of an investment advisory firm who splits his time between homes in New York and Florida. He’s noticed the rate hikes – and says a lot of other folks he runs into have as well. We don’t want to kill the proverbial goose that laid the golden egg. We must get the cost drivers of our homeowners insurance market under control – and can only do so with the legislature’s help.
LMA Newsletter of 2-14-22
