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Insurance Market

One of the insurance companies who works really hard to keep their clients and Realtor partners informed send this email out today. We wanted to make sure our clients know what’s going on with the insurance market.

Dear Insured,
As we focus our May newsletter, we typically focus on hurricane season being 30 days away from starting.  However, this year we have a different storm forming in the Florida insurance marketplace.  While we have not had a major hurricane hit Florida since Hurricane Michael in 2018, we have seen a significant deterioration in the Florida insurance marketplace. 
We at HH Insurance, feel your pain of continued rate increases without a justified reason as most insured’s have not had a claim.  We sincerely feel for al our policyholders who have had an abnormal rate increase compared to typical market conditions on a year over year basis.  As a result, we have continued to maintain our position of annually shopping your policy proactively to always maintain the best rate and coverage for your homes & properties.
With that being said, we are optimistic that relief is on the way, but we need your help to enact real change and rate stabilization in the marketplace.  The Florida Senate,specifically Senator Jeff Brandis and Senator Jim Boyd, fought for rate stabilization this year and passed legislation that would have immediately provided rate impact with bipartisan support.  Unfortunately, the Florida House of Representatives did not feel that rates were increasing enough to justify passing legislative relief for Floridians.  The speaker of the Florida House, Chris Sprowls was publicly quoted stating that we need to use a wait and see approach to market conditions. Unfortunately, just in the past 90 or so days, we have seen 4 of the top 20 Florida homeowners insurance carriers lose their “A” rated financial strength and 3 of them were declared insolvent with potentially more on the way.  (Within HH Insurance, we have proactively monitored financial strength so that our policyholders are continuously protected, and we have proactively rewritten policies ahead of a carrier losing their financial strength). 
As a result of this, Governor DeSantis has declared a legislative special session to help deal with the issues.  However, without your support and voice being heard to the Florida House of Representatives we will not see the meaningful needed reform to provide rate stabilization. 
Here are the facts that are driving up all Floridians homeowners insurance rates:

  • Only 3 companies have a cumulative positive net income in the last 5 years out of 52 residential carriers.  As a consumer, you want your homeowners insurance carrier to be profitable as it provides rate stabilization and claims paying ability. 
  • Florida had 85,000 industry wide lawsuits in 2020 vs 100,000 in 2021. Intent to Litigate Notices (ITL) not included. 49 other states had an average of ~730 lawsuits in 2021.  Within perspective that means that Florida has 1,000 lawsuits against a homeowners insurance carrier per 1 lawsuit in all other states combined.  This would make sense if Florida had 1,000 claims per 1 claim in all other states combined, except that per capita Florida has an equal contribution of claims, it is just lawsuits that are out of proportion. 
  • Across Florida, 75% of all roof claims end up in litigation and 70% of total litigated claims in Florida are roof-related.  The “not-so-free” roof scheme that has been occurring across Florida, specifically in areas like Orlando, are significantly driving up litigation.  The reason it is driven up is that in Florida we have a one way attorney fee statute with a fee multiplier.  This means that if a homeowner files a claim for wear and tear on roof that was never designed to be covered in a policy and the carrier denies the claim, the roofer refers the homeowner to an attorney.  The attorney files a lawsuit against the insurance carrier.  If the carrier wins at the lawsuit (which they typically do win) they still are required to pay all of their attorney’s fees without recourse.  If the insurance carrier loses the lawsuit or loses part of the lawsuit, the carrier is required to pay all their legal along with all of the plaintiff attorney’s legal fees with a fee multiplier.  A fee multiplier means that if the plaintiff attorney would typically charge $500 an hour, the insurance carrier has to pay them $1,500 an hour.  As a result, Between 2013 and 2020, Florida’s property insurers paid out $15 billion in claims costs. Only 8% percent of that was paid to consumers, while 71% was paid to plaintiff attorneys (more than $10 billion).

As a result of the legal environment that is allowed in Florida, we have seen an exponential increase in litigation activity with 384 lawsuits filed per day against homeowners insurance carriers compared to an average of 2 lawsuits filed per day in every other state.  This means that Florida comprises 8% of property insurance claims nationwide, but almost 80% of property insurance claims-related lawsuits in the nation.

That creates the question: How can we fix this type of operating environment in Florida? The Florida Senate passed 3 bills that would drastically help the market and stop the abuse of the system on all claims but particularly roofing claims.  However, we also need the Florida House to participate and understand the pain and frustration of rising premium rates occurring on your homeowners insurance policy.  To do so, your elected officials need to hear from you!  To get in touch with your elected officials, you can use this link to find the contact information for your representative and we highly encourage you to send an email and call and express your frustration for the failure to pass any meaningful legislature for the past two years.  You can also use the website, Floridian’s for Lawsuit Reform to send a pre-form email to your elected officials based on your property address.

To provide some additional context on the reform, we at HH Insurance do not believe that there should not be a fee multiplier in certain lawsuit cases.  A fee multiplier was an essential part of most civil rights reform across the country in the 1960’s and 1970’s as it encouraged an attorney who would not typically put in the manpower for a challenging case to be financially incentivized to help a plaintiff.  Within our office, we insure a law firm who has taken on Vaping Manufacturer’s who advertise towards teenagers and helped harmed families be restored and they should receive a fee multiplier in these rare and exceptional David versus Goliath type cases.  However, when you see 8% of claim dollars are going to policyholders while 71% of the dollars are paid to plaintiff attorney’s with 1,000 to 1 type statistics, it indicates that change should occur as the small minority are abusing the system and harming the vast majority of homeowners.  There are always some extenuating circumstances that create a need for litigation in all industries, I personally do not believe that 75% of roofing claims were underpaid. It this intent of the insurance policy to offer sudden and accidental loss, not a maintenance policy of a house.  The legislation that was passed by the Florida Senate did not remove the fee multiplier language, but it does restore that it should only be used in rare cases, not in over 100,000 lawsuits in a year. 

In addition to the need for legislative reform, inflation is also a huge driver on homeowners insurance pricing right now.  We are seeing record gains in the real estate market as well as the construction cost basis for claims.  What would have been a $15,000 kitchen claim in 2019 is now a $35,000 claim in 2022 as a result of record construction inflation.  Unfortunately, when you multiply that across hundreds of thousands of claims across the industry, that creates massive pricing pressure that is then multiplied by the roofing and legal fee crisis occurring in Florida. 

Our goal has been, and continues to be, advocating for our policyholders.  We want to see a healthy insurance marketplace where carriers are creating a profit as that would create the opportunity for rate decreases in Florida.  Florida is an expensive state for homeowners insurance due to our catastrophic activity of hurricane risk, however, it should not be seeing rate increase in the double digit range annually, year after year.  We highly encourage you to take 5 minutes and take control of your homeowners insurance rates by getting involved and expressing your frustration to your Florida legislative representative that we need reform and they should be following the lead of Governor DeSantis and the Florida Senate to create a healthly Florida insurance marketplace. 

Thank you for your continued support of HH Insurance!  Our commitment is to continue advocating for you and providing annualized policy reviews fighting for you in this market.


Jake Holehouse

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