Guy C. Fraker
Last fall, I was commissioned to complete a consumer- focused analysis of Florida’s property insurance market. What I discovered is best described referring to an iconic film trilogy. Florida’s dwelling insurance market should be called The Matrix. In the films, people exist in comas, their stasis used as batteries to power parasitic robotics. All the while, they are embedded with an illusion of reality. Seven million Floridians are being used to power parasitic entities while being asked to accept a deplorably false narrative about insurance companies.
The resulting impacts include citizens paying a hidden tax that grows by 30% per year. Consumers are also experiencing shrinking insurance availability, deteriorating stability among insurers, future hurricane damage assessments that will span generations, and an inevitable real estate market crash.
In a recent editorial, The News-Journal was highly critical of the proposed reform bill, SB 76, sponsored by Senator Jim Boyd. I’d like to offer a counter position supporting SB 76 as it includes many essential corrective measures — and applaud coverage of Florida’s homeowners’ insurance crisis.
A STORM IS COMING
SANTIAGO: Fraud, litigation are the real culprits
Here are the facts: Florida has a network of plaintiff attorneys, contractors, public adjusters and others who use a collection of statutes, unique to Florida, to generate income from property insurance claims. By connecting these statutes, these professions created their own economic engine that essentially legalizes financial abuse.
By my analysis, over the past three years plaintiff attorneys have filed 251,757 lawsuits, averaging 83,919 per year. Despite an attempt at corrective action through reforms in 2019, the number of filed lawsuits continue to grow. Forecasts from the first quarter of 2021 indicate this will be the first year of more than 100,000 suits in a single year.
How does this compare with other states? According to a report recently shared by Commissioner David Altmaier with the chair of the House Banking and Insurance Committee, Florida accounts for 8% of all U.S. claims, while experiencing 76% of the nation’s property insurance lawsuits. This isn’t exactly splitting hairs.
Every other state afflicted by hurricanes enacted laws titled “consumer cost containment measures,” specifically to protect citizens from these same predatory practices. SB 76, despite flaws, is a multi-faceted bill that takes essential first steps towards protecting Florida’s citizens and economy. This is first accomplished by correcting incentives and rewards within Florida’s litigation economy that took $4 billion from 7 million Floridians in 2020, $12.7 billion since 2013.
Let me take on more myths:
- Myth: There are limited legal abusers and we don’t need SB 76. Current laws make identifying bad actors nearly impossible. But over the last three years, trial lawyers have filed 95,916 property lawsuits, an average of 31,972 per year. This is approximately 424 Florida lawsuits suits for each one suit in other hurricane-prone states.
- Myth: SB 76 hurts consumers by cutting the time allowed to get a claim paid. SB 76 modifies the time allowed for customers to notify their insurer a claim has occurred from three years to two. This has no impact on the time needed to complete repairs, nor time needed to close the claim. Is asking us to check our own dwellings for damage within two years of an event unreasonable?
- Myth: Insurance companies get rich not paying what they owe. Nearly 91% of all claims are settled without dispute. Florida plaintiff attorneys also engage in filing multiple lawsuits on a single claim. One insurer received 40 lawsuits from one law firm on the same loss. Expenses and paid claims average 97 cents for each $1 of premium in other states routinely facing catastrophes. Florida insurers pay out $1.62 for each $1 of income. If SB 76 fails, 7 million Floridians are guaranteed to face years of rate increases.
- Myth: I cannot insure my decade-old roof under SB 76. SB 76 allows companies to limit coverage on older roofs rather than mandates them to do so. Therefore, consumers even with older roofs will be able to make a choice for replacement depending on affordability. Insurance is a risk-sharing mechanism. This means people with newer, or well-maintained roofs, pay more than they should to cover the risk and losses of those who need roof repairs or replacement, but defer hoping a storm will force an insurer to pay. I may like my neighbor, but do I like him enough to pay for repairs on his house?
Floridians deserve available, affordable and reliable, property insurance. Florida’s real estate market needs protection. Confidence must be restored among investors and reinsurers. SB 76 is the essential best first step, and I encourage all Floridians to call their legislators to voice support.
Guy C. Fraker, of Summerland Key, owns the consulting firm Cre8futures advisory and is an adjunct scholar at the James Madison Institute.