How did we transfer — in simply 5 years — from a vibrant market the place financially stable corporations competed for enterprise to an unhealthy surroundings the place policyholders who’ve by no means filed a declare are being dropped or see their premiums leap by 30, 40, 70 % in a yr?
Lately, we received a solution.
The Florida Workplace of Insurance coverage Regulation reviewed 750 insurance coverage corporations from across the nation. It discovered that Florida accounted for under 8 % of all claims filed nationwide in 2019, however practically 76 % of all lawsuits. That quantity, taken from knowledge gathered by the Nationwide Affiliation of Insurance coverage Commissioners, shouldn’t be solely mind-blowing however clearly unsustainable except Floridians settle for the extent of price improve we’re seeing right now.
Whereas the NAIC knowledge is unbelievable, it’s not surprising. Florida home insurance coverage corporations posted a $1.6 billion working loss in 2020, the newest of 4 progressively unprofitable years. Whereas storm exercise performed an element in final yr’s losses, keep in mind that no main storms hit Florida in 2020. As a substitute, the main purpose for these unsustainable losses is extreme and abusive litigation on a scale that exists nowhere else within the nation.
Residents alone final yr acquired 7,599 new litigated claims. Throughout the first quarter of 2021, we acquired 2,506 new claims. Knowledge reveals greater than 85,000 new litigated property claims had been filed in opposition to insurance coverage corporations final yr.
In addition to elevating charges, some corporations have stopped writing new enterprise, whereas others limit what they write, or scale back protection on the insurance policies they renew. In response, Residents is writing shut to five,000 new insurance policies per week. After reaching a low level of round 420,000 clients only a yr and a half in the past, we count on to finish 2021 with near 750,000 clients.
Residents is financially sound, however its surplus might be depleted shortly as our coverage depend grows. As soon as surplus is exhausted, Residents might be compelled to evaluate its policyholders as much as 45% of their coverage premium. Moreover, thousands and thousands of non-Residents policyholders might be compelled to pay assessments, if wanted.
Critics say the speedy rise in litigation is the fault of insurance coverage corporations for underpaying claims. Nevertheless it defies widespread sense to assume that Florida insurance coverage corporations are so out of whack with insurers in each different state. Florida’s distinctive authorized panorama, which incorporates one-way legal professional charges — is basically in charge.
On daily basis, extra Floridians see the influence of this litigation explosion and are calling for motion. I urge the Florida Legislature to move significant litigation reforms that can assist to cease runaway authorized prices that influence policyholders throughout the state who’re being cancelled, compelled to seek out new protection or pay greater premiums to guard their Most worthy funding — their houses.
Barry Gilway is the President/CEO and Govt Director of Residents Property Insurance coverage Company, Florida’s non-profit insurer of final resort.