Important questions and answers
The insurance consumer and market reforms passed by the Florida Legislature last year and this year are starting to make a difference already but we are another good 12-18 months away from seeing the impact on rates and homeowners premiums. Yet the ongoing hurt, as we’ve been chronicling on these pages for years, is real and continues impacting Florida residents, the real estate market, and ultimately the state economy.
A recent mortgage industry publication article, Insurance Storms Whip The Sunshine State reports that higher insurance costs on borrowers are squeezing would be homebuyers and investors out of the market. The article quotes one Tampa area mortgage originator as estimating that 10% to 20% of his loan applications have fallen through on account of insurance rate increases. The Tampa Bay Times reports that high homeowners insurance rates are pushing existing families out of Florida.
Screenshot from the Property Insurance Town Hall featuring (clockwise) Insurance Commissioner Yaworsky, Senator Book, and Senator Pizzo via Facebook
The Florida Senate Democratic Caucus last Wednesday held a “Property Insurance Town Hall” on Facebook to discuss constituent concerns on higher costs and related topics. Senate Minority Leader Lauren Book and Leader Pro-Tem Senator Jason Pizzo, whose districts together cover parts of Broward & Miami Dade counties were joined by Florida Insurance Commissioner Michael Yaworsky. Book shared a couple of consumer stories about how hard times are, calling her contingent the “silver tsunami” who will lose their homes if these rate increases continue.
Pizzo said he doesn’t like the new annual litigation data call being protected under trade secret rules and sought to get more detail on market conduct exams from the commissioner, who deferred to it being confidential information. As to why rates are up? The commissioner responded that rates are based on actuarially sound principles. He said he doesn’t expect Hurricane Idalia to have a major impact either, given its relatively small number of claims. Yaworsky said some of the changes that took effect in the reform – beyond the elimination of one-way attorney fees – will take time to implement and see results. He pointed to the recent 26% average increase in reinsurance rates (versus last year’s 60% increase) and the fact he’s approved five new companies to write in Florida as signs the reforms are instilling new confidence – and capital – in Florida’s property insurance market, which will ultimately benefit consumers.
There’s no doubt that cheaper reinsurance for insurance companies means cheaper insurance for homeowners. I told Bay News 9 afterward that if our state leaders would lead public policy by creating more state backed reinsurance at about 10-15 cents of every dollar we pay versus private reinsurance at 35-40 cents of every dollar we pay, then we can at least stop the rate increases from being so high. We need a leveling mechanism for these increases, an additional reinsurance bridge, such as the proposed Florida Insurance Rate Reduction Mechanism (FIRRM), to build upon the 2022 reforms.
Screenshot from the WPTV-TV televised town hall meeting “Coverage Collapse.” Courtesy, WPTV-TV
Last Tuesday night, WPTV-TV in West Palm Beach held a televised town hall, attended by homeowners along the Treasure Coast. Panelists included legislators from both parties, the head of an insurance agency, a real estate agent, and other industry stakeholders. Several audience members said they were considering moving out of the area because of rising costs, including insurance. It was explained that higher premiums and cancellations (without ever making a claim) are a result of the law of large numbers, not just an individual’s policy, and that a high number of litigated claims and last year’s hurricanes impacted that. Robert Norberg of Arden Insurance told the audience that he’s seen premiums get cut in half with mitigation credits through the MySafeFLHome.com program that provides a $2 to $1 match for qualified home hardening improvements.
I was asked recently whether we should expect rate increases to continue. My answer: Not at the levels we have seen the last couple years. We are estimating another 10% to 15% increase for 2024 versus the 40% plus we have seen in 2023.
LMA Newsletter of 9-11-23
