Florida property insurance reform continues with signing of SB 76

Governor of Florida Ron DeSantis signed into law the latest addition to efforts to reform the Florida property insurance market, as legislators try to stem rising prices and reduce insurance related litigation that has been inflating claims.

Governor Ron DeSantis signed Senate Bill (SB) 76, which is his latest commitment to insurance reform in Florida.

This specific bill restructures litigation rules for disputed insurance claims, by reducing time limits associated with them and lowering insurers exposure to attorney fee law suits.

It also expressly disallows contractors, public adjusters, and companies from using prohibited advertisements that encourage Floridians to make an insurance claim for roof damage, which has been a particular driver of issues in the state over the years, with fines of up to $10,000 to be levied if the law is broken.

Commenting on the signing DeSantis said, “Since my first days in office, I have been committed to doing whatever it takes to reduce the burden of property insurance on Florida families. That includes signing into law historic reforms to the assignment of benefits process and appointing principled justices to our state courts.”

“I applaud Governor DeSantis for taking action today on critical insurance reform,” added Insurance Commissioner David Altmaier. “The action today builds on the commitment the DeSantis administration has shown since Day One to make meaningful insurance reforms that help protect all Floridians by promoting the long-term sustainability of Florida’s insurance market and keeping our market competitive. Thanks to CFO Patronis, President Simpson, Speaker Sprowls, Senator Boyd, Representative Rommel, and the Florida Legislature for crafting this thoughtful legislation. Senate Bill 76 takes important steps to address the unique challenges facing the Florida property insurance market, address cost drivers within the market, and help stabilize rates for consumers.”

“Florida has become a beacon for companies who canvass neighborhoods creating roofing claims that would not otherwise be filed, driving up the cost of insurance for everyone. To mitigate these rising premiums, this legislation prohibits predatory roofing advertisement to prevent the abuse of fraudulent claims by contractors trying to take advantage of homeowners,” Senate President Wilton Simpson commented. “The bill also establishes fair and reasonable guidelines for both the insurer and the insured during the claims process. I’m grateful to Senator Boyd for his leadership in guiding this legislation across the finish line and to Governor DeSantis for the strong stand he is taking to ensure Floridians have more affordable property insurance that they can count on in the horrible circumstance where a home is severely damaged or destroyed.”

“Homeownership is the foundation of the American Dream,” Florida House Speaker Chris Sprowls said. “Today’s reforms to our property insurance market help protect that dream for decades to come by bolstering the market, increasing affordability, and protecting consumers from fraud and abuse. This thoughtful and bold reform package, that defends Florida’s homeowners, is made possible through the leadership of Governor DeSantis, and strong leaders like President Simpson as well as Senator Boyd and Representative Rommel, who worked diligently through these complex issues to protect Floridians across the state.”

“Homeowners property insurance rates have increased by 20, 30, 40 percent or higher in some cases,” explained Senator Jim Boyd. “Since 2013, $15 billion has been paid out in claims in Florida. From those funds, 71 percent went to attorney fees, 21 percent to insurers defense costs, and a mere 8 percent went to the property owners for their losses. Florida accounted for over 76 percent of all homeowners’ litigation in the country in 2019. With the passage of SB 76, I believe we will see a downward impact on those rates. I appreciate the Governor’s leadership on this issue that will save our constituents on their annual homeowners insurance costs.”

“Florida’s property Insurance market has been in crisis for years,” added Representative Bob Rommel. “Besides weather events, bad actors have been targeting homeowners and insurance companies. Over the past 7 years, insurance companies have paid out over $15 billion in claims, out of which over $10 billion went to attorney’s fees. SB 76 is a big step towards stopping the abusive practices of these few bad actors, where they encourage homeowners to file insurance claims or even lawsuits. We have over 1,100 people a day moving to Florida and we need to ensure that consumers have the ability to obtain affordable insurance policies from private companies and not just Citizens, which was originally set up as the insurer of last resort. SB 76 will stabilize the market and should attract new insurance carriers to Florida.”

Rommel’s comment explains one of the main drivers of any savings for the insurance and reinsurance industry as a result of this bill, the chance of reduced attorney fees becoming a claims inflationary factor.

However, the other area the bill seeks to address, is reforming the practice of fully-replacing roofs that are older and only partially damaged, by roof replacement claims being restricted to the value at the time of damage of a 10-year or older roof.

In Florida, if 25% or more of a roof is damaged, the whole roof is typically replaced under insurance. At the same time, contractors have pushed for assignment of benefits (AOB), allowing them to take on the claim and using unscrupulous methods to push for full roof replacement after storms and hurricanes.

This practice was a significant driver of the loss creep from hurricane Irma in 2017 and hurricane Michael in 2018.

It’s hoped that by stemming these practices, through this legislation, runaway insurance loss amplification can be stemmed and so insurers can operate more effectively in the state of Florida, while reinsurance capital will have a greater ability to estimate storm related claims, with inflation and amplification potentially a lot lower.

It’s a step in the right direction and another much-needed deliverable to reform Florida’s property insurance market.

However, with inflationary pressures on the rise, as our recent video interview explained, there are other factors insurance and reinsurance market participants need to be wary of as hurricane season begins.