Barry Gilway: What has happened to the Florida property insurance market?

How did we move — in just five years — from a vibrant market where financially solid companies competed for business to an unhealthy environment where policyholders who have never filed a claim are being dropped or see their premiums jump by 30, 40, 70% in a year?

Last week, we got an answer.

The Florida Office of Insurance Regulation reviewed 750 insurance companies from around the country. It found that Florida accounted for only 8% of all claims filed nationwide in 2019, but nearly 76% of all lawsuits. That number, taken from data gathered by the National Association of Insurance Commissioners, is not only mind-blowing but clearly unsustainable unless Floridians accept the level of rate increase we are seeing today.

While the NAIC data is incredible, it is not unexpected. Florida domestic insurance companies posted a $1.6 billion operating loss in 2020, the latest of four progressively unprofitable years. While storm activity played a part in last year’s losses, remember that no major storms hit Florida in 2020. Instead, the major reason for these unsustainable losses is excessive and abusive litigation on a scale that exists nowhere else in the country.

Citizens alone last year received 7,599 new litigated claims. During the first quarter of 2021, we received 2,506 new claims. Data shows more than 85,000 new litigated property claims were filed against insurance companies last year.

Besides raising rates, some companies have stopped writing new business, while others restrict what they write, or reduce coverage on the policies they renew. In response, Citizens is writing close to 5,000 new policies per week. After reaching a low point of around 420,000 customers just a year and a half ago, we expect to end 2021 with close to 750,000 customers.

Citizens is financially sound, but its surplus could be depleted quickly as our policy count grows. Once surplus is exhausted, Citizens could be forced to assess its policyholders up to 45% of their policy premium. Additionally, millions of non-Citizens policyholders could be forced to pay assessments, if needed.

Critics say the rapid rise in litigation is the fault of insurance companies for underpaying claims. But it defies common sense to think that Florida insurance companies are so out of whack with insurers in every other state. Florida’s unique legal landscape, which includes one-way attorney fees — is largely to blame.

Every day, more Floridians see the impact of this litigation explosion and are calling for action. I urge the Florida Legislature to pass meaningful litigation reforms that will help to stop runaway legal costs that impact policyholders across the state who are being canceled, forced to find new coverage, or pay higher premiums to protect their most valuable investment — their homes.

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Barry Gilway is the president/CEO and executive director of Citizens Property Insurance Corporation, Florida’s nonprofit insurer of last resort.