After two bills aimed at fixing the property insurance woes in Florida passed, experts are hopeful the new measures are a step in the right direction, but the effects will still take time.

Florida Governor Ron DeSantis signed Senate Bill 4-A and Senate Bill 2-A in special session last December. The first bill provides $750 million for disaster relief in the form of tax relief to Floridians affected by Hurricane Ian and Hurricane Nicole. The second bill is a property insurance reform that aims to stabilize the market by increasing competition and strengthening consumer protections.

SB 2-A unilaterally eliminates attorney fees for property insurance claims, in an effort to discourage lawsuits and reduce excessive litigation, which is meant to reduce premiums for homeowners. The bill would also enhance the ability of the Office of Insurance Regulation to conduct market tests of property insurers to prevent abuse of the appraisal process. This will reduce the timeline for insurers to receive payments to policyholders.

Jerry Theodoro, director of finance, insurance and business policy for the R Street Institute, said excessive litigation is the main issue responsible for the Florida insurance industry being in an unfavorable position for a long time. “They are good measures,” he said of the bills, “mainly because they came at an abuse of the legal system, which has been responsible for artificial inflation of claims, which has led to an increase in premiums.”

Unfortunately, these measures will take time to go through the system, he said, “and there is resistance from some law firms and contractors who have benefited from doing those things, but in the long run, that’s what needs to end.” “

Jennifer Gimbel, home insurance expert at PolicyGenius, said 2022 was a difficult year in the Florida home insurance market. Florida has filed more than 535,000 claims since Hurricane Ian, with an estimated $5.9 billion in insured losses as of last October. The average cost of property insurance grew 39% more than the national average, said PolicyGenius analysis, which predicted the market to continue to grow.

Ms. Gimbel said, “Costly natural disasters, fraudulent roof damage lawsuits and company bankruptcies have brought the market to the brink of collapse.” “Homeowners are dealing with record-high insurance rates and limited insurance options outside of civilian property insurance.”

Fewer options for Florida homeowners would prompt them to seek coverage from the Citizens Property Insurance Corporation, the state-run insurance company, Florida’s source of last-resort insurance. “Therefore, the market is going to remain under pressure,” said Mr. Theodoro.

Another factor contributing to the pressure is reinsurance, he said. Reinsurance is insurance that insurance companies buy to “protect their balance sheets”. And it’s gotten a lot more expensive, so those costs are being passed on to the policyholder, and some of the smaller insurance companies may not be able to buy enough insurance, which will put some of them out of business. So, it’s a shrinking market.

Since 2020, 15 insurance companies have declared bankruptcy in Florida, including FedNet Insurance, Southern Fidelity, Lighthouse, Avatar Property & Casualty, St. John’s and Weston Property & Casualty. According to the Insurance Information Institute, Florida filed 75% of all property claims lawsuits in the country in the past two years.

Fortunately, Mr. Theodorou continued, Citizens Insurance is in good shape, with their expense ratio — the company’s total expenses divided by premiums — around 14% or 15%, compared to other insurers whose expense ratios are on average. 30%.

“Because insurance companies [need to] By protecting their balance sheet, they limit the amount of what they can lose in an event,” he said. “If another Hurricane Ian hits, that would mean more of those smaller companies fail. Will happen.”

In one analysis of Florida companies alone, Mr. Theodorou did, they only hold about 35% of the coverage risk and 65% is passed on to reinsurers. “So, if the price of reinsurance goes up by 25% or 35%, it becomes very expensive for them and that puts a strain on their finances. If they get hit by another big storm, it could mean Meaning there could be a potential threat of going out of business.

Still, Florida homeowners aren’t likely to see a reduction in home insurance rates this year, Ms. Gimbel said, but because of new laws put in place late last year, “we will see more insurance companies enter the market.” can start to see you do.”

Another draw for insurers returning to Florida is the newly created Florida Alternative Reinsurance Assistance Program — she said — which set up a $1 billion fund to bail out insurers after a major hurricane or natural disaster.

“The more home insurance companies willing to write policies in the state, the more likely homeowners will be able to find a policy with competitive rates and coverage and stop relying on Citizens,” she said.

Previously, Florida legislation passed SB 2-D in May with $2 billion in reinsurance relief, requiring insurers to file a supplemental rate file after enrolling in the program to provide relief to policyholders. It prohibited insurance companies from denying coverage based on the age of a roof if the roof is less than 15 years old or if the roof has at least five years of useful life remaining, according to Florida law. It also required companies to provide a proper explanation if they deny a claim, created a new standard for the application of attorney’s fee multipliers, and limited the assignment of attorney’s fees to cases.

Another bill passed in May was HB 7065, which aimed at insurance assignment agreements, “establishing requirements for the execution, validity, and effect of such agreements, and creating a formula that would determine which party, The award should receive attorney’s fees, if any, that result from litigation related to an assignment agreement, according to a press release by the state.

The new series of laws also require civilian policyholders who qualify for a private policy to drop the civilian policy and go with a private insurer. “So in short,” Ms. Gimbel said, “this year homeowners may be forced to purchase a more expensive private policy, and for homeowners living with Citizens, they may have to pay for flood coverage in addition to their home insurance.” Will need to buy insurance.” policy, regardless of the flood risk of their home. This requirement will be phased in over the next four years, beginning in April.