Insurance Agents on the Front Line of Florida’s Mounting Property Market Problems

While carriers face growing financial losses in Florida’s distressed property insurance market, insurance agents are on the front lines trying to help their clients who are being hit with double-digit rate increases, non-renewals, coverage restrictions or refusals from the admitted market.

The situation has become untenable, Florida agents say, and they hope the state’s legislature will take action in the current legislative session so Florida policyholders can access the insurance they need.

“We are taking sides for Floridians. I want a healthy stable insurance market because a stable insurance market is critical for a healthy economy,” said Mary Katharine Lawler, president of Doug Croley Insurance Services in Tallahassee.

Agents like Lawler have been working on educating not only their clients about Florida’s market woes and what needs to be fixed, but also lawmakers.

“Our clients are our neighbors and our community members, and your constituents, and we are the ones who are dealing with them every day,” Lawler testified to lawmakers at a House committee meeting in January. “You cannot buy a home, you cannot buy a car, you cannot run a business if you don’t have insurance. It is a critical component of our economy … this is affecting all Floridians.”

Agents recounted what they are experiencing in the current market and the frustration they hear from their clients to Insurance Journal, and they worry that lawmakers don’t understand the seriousness of Florida’s insurance market problems.

“We are seeing 30%+ rate increases across both personal lines and commercial lines. … Either we call our insureds, or they will call us once they receive their renewal offers,” said Alicia Rosier Stevens, agency development manager for Rosier Insurance in Southwest Florida. “Florida needs real reform. We have been trying to get our elected officials to pass good legislation for years. We have been telling them that if they do nothing, that this will happen – rates will rise, markets will leave. We want our clients to have options. We don’t want them to have to pay more for less coverage.”

“Every single call from every client is complaining about their rate and the availability of coverage,” said Robert Norberg, president of Arden Insurance in Lantana. “It is a big crisis here in Tri County.”

“We have seen admitted markets shut down in our area of South Florida. The age of the home was a big criterion and now it’s lack of availability, which is really sad. Our customers are very upset about it and we are hoping we get some relief from the legislature,” said Randy Iten, president of Iten Agency in Davie.

The deteriorating financial condition of Florida’s domestic companies is blamed on several factors: excessive litigation, contractor schemes, several years of major catastrophes and higher reinsurance costs. The combination of these factors led to $1 billion in losses for Florida domestic companies during the first three quarters of 2020, more than double the underwriting losses of 2019, according to Insurance Commissioner David Altmaier.

That has translated into steep rate increases for policyholders, and there appears to be no sign of relief. The Florida Office of Insurance Regulation approved 105 rate changes, 90 of which were for rate increases, over the last year, with 55 of those for rate increases of more than 10%.

Rate increases are just part of the fallout. Lawler told lawmakers there is a lack of market availability, particularly for older homes, short term rentals and small commercial policies, as well as policy nonrenewals and cancellations. Carriers across the state are issuing water damage limitations, water exclusions and actual cash value (ACV) on roofs. One carrier, she said, will now only write homes more than 40 years old on ACV basis unless the policyholder replaces the home’s roof, plumbing and HVAC system.

Customers are getting less coverage at a higher cost. “This is poor value for customers,” Lawler said.

Policyholders are being used as a “conduit to extract money from insurance companies,” Lawler said, and without reform, market conditions will worsen.

“Third parties are targeting consumers who are either knowingly or unknowingly becoming participants in insurance abuse and fraud, even for valid claims,” Lawler told lawmakers. “Third parties are taking advantage of policyholders’ ignorance in the claims process.”

Kyle Ulrich, president of the Florida Association of Insurance Agents, said third parties, lawyers, contractors, roofers or water remediation firms, who “don’t have any skin the game,” are convincing unwitting homeowners across the state to file claims and lawsuits with promises of a new roof or other unneeded home repairs.

“There are financial incentives in our system right now that create the opportunity for someone else to make money on that transaction,” he said.

Agents have been educating clients about these schemes, Lawler said in an interview with Insurance Journal. At the same time, however, Floridians are being bombarded with advertising that “falsely portrays the insurance industry as evil, and it is misleading consumers because they do not fully understand the insurance process, they do not understand that ultimately all policyholders are paying the premiums.”

Lawler said the insurance industry isn’t good at educating consumers, and company customer service and claims handling can be lacking. But she sees that worsening as companies more heavily scrutinize claims and enact coverage restrictions.

“If we had more [company] choices, we could have better service and better policy forms for our clients,” she said.

FAIA has urged the legislature to enact property reforms, specifically backing Senate Bill 76, which seeks to tackle roofing claims abuse and attorney fee multipliers, and would shorten the current deadline for new, supplemental and reopened property claims from three years to two. The bill also requires a 60-day notice of a property insurance claim before a suit can be filed against an insurer and gives insurers 30 days to inspect a property, among other provisions.

Sponsor of the bill Senator Jim Boyd, also an insurance broker, said the legislation would benefit both insurers and insureds by encouraging insurers not to underpay valid claims while also encouraging claimants to make reasonable demands. The bill would provide “fair access and reasonable guidelines” for both insurers and insureds during the claims process, he said, and prevent the abuse of claims by predatory attorneys and contractors. But attorneys and contractors say it limits consumers’ rights.

To encourage agents to get involved in the legislative process this year, FAIA modified its annual “Capitol Days” advocacy event to be a virtual “Political Engagement Month” throughout February because of the pandemic. FAIA held online forums to educate agents on the state of the marketplace and insurance-related bills and provided opportunities to meet with lawmakers.

Ulrich said agents have a unique perspective that lawmakers need to hear because they work with the consumers who are affected by what is happening in the marketplace, many of whom cannot afford such steep rate increases.

“There’s a realization amongst many of our members that they know they have to be part of the solution,” Ulrich said. “It’s in agents’ and consumers’ best interest that there’s a stable marketplace with a lot of competition on both forms and prices.”

Lawler urged other agents to speak up to their lawmakers and encourage their clients to do the same so the legislature will act this year.

“This is not a situation where you can just sit back and let someone else do it,” she said. “Take five minutes and call your local officials.”