Florida's homeowners insurance market is in a state of crisis. Premiums have skyrocketed to the highest in the nation, insurers are going insolvent or fleeing the state, and the state-run "insurer of last resort", Citizens Property Insurance, has ballooned to over 1 million policies. How did we get here? The answer lies in a toxic combination of rampant litigation, fraud, and regulatory failure.
For years, Florida has been the epicenter of homeowners insurance lawsuits in the U.S. The state accounts for only 9% of claims but a staggering 79% of lawsuits[5]. This is largely due to Florida's unique "one-way attorney fee" statute, which allowed policyholders to hand over their claims to contractors and attorneys, who could then sue insurers and collect massive fees - even if the judgment was much smaller than the fees[1][4].
This perverse incentive fueled an explosion of often frivolous litigation. Unscrupulous contractors canvassed neighborhoods, convincing homeowners to sign over benefits on dubious claims. Insurers were then hit with inflated lawsuits they had to pay to defend, even if they won. From 2013-2020, Florida insurers paid out over $15 billion in claims costs, but only 8% went to consumers - the rest was gobbled up by attorneys' fees and costs[5].
Excessive litigation is a key reason why insurers have been drowning in red ink, with net underwriting losses exceeding $1 billion in both 2020 and 2021[5]. Many smaller Florida-based insurers simply couldn't handle the onslaught of lawsuits and went insolvent. Others stopped writing new policies or pulled out of the state entirely. As a result, Citizens has more than doubled its policy count to over 1 million, putting taxpayers on the hook if a major hurricane strikes[1][3].
While litigation is the biggest culprit, fraud and lax regulation have also played a role in the crisis. Fraudsters take advantage of loose claims filing rules to submit exaggerated or false claims, knowing that insurers may settle rather than get dragged into court[6]. Meanwhile, state regulators have been too slow to act, allowing struggling insurers to continue writing risky policies and setting premiums too low to cover costs[2].
Lawmakers have finally started to address these issues, but in a flawed manner that favors insurers over consumers. Recent reforms eliminated one-way attorney fees and assignment of benefits, and shortened claims deadlines[1][4]. While this may discourage some frivolous suits, it also makes it harder for legitimate claimants to dispute low-ball settlements. The law does little to actually reduce underlying claims costs or improve market stability.
What's really needed is a more balanced approach that cracks down on fraud and abuse by contractors and attorneys, while still protecting policyholders' rights. The state should:
Tighten licensing rules and penalties for contractors who engage in claims solicitation or fraud
Allow insurers to offer cash roof rebates and other managed repair options to reduce inflated claims
Create a state-run mediation program as a faster, lower-cost alternative to lawsuits
Raise Citizens' rates to actuarially sound levels and return it to an insurer of last resort
Strengthen the state insurance guaranty fund to pay claims if more insurers fail
At the same time, lawmakers must hold insurers accountable by:
Increasing fines and penalties for unfair claims settlement practices
Prohibiting insurers from using arbitration clauses that limit policyholders' rights
Requiring insurers to report detailed claims and litigation data to identify bad actors
Expanding the state insurance consumer advocate's office to help homeowners with disputes
Without a more comprehensive fix that balances the interests of insurers and consumers, Floridians will continue to face an unstable market, skyrocketing premiums, and the risk of being left without coverage when the next hurricane hits. The state's leaders must put aside politics and special interests to cooperate on real solutions. Our homes and our economy depend on it.
-Doug Liles
Sources
[1] Florida Aims to Rebuild Homeowners Market with Reform Law - CRC Group https://www.crcgroup.com/Tools-Intel/post/florida-aims-to-rebuild-homeowners-market-with-reform-law
[2] Can Lawmakers Save the Collapsing Florida Home Insurance Market? https://www.bankrate.com/insurance/homeowners-insurance/florida-homeowners-insurance-crisis/
[3] Florida insurance regulation creates big changes | Grant Thornton https://www.grantthornton.com/insights/articles/insurance/2023/florida-insurance-regulation-creates-big-changes
[4] Governor DeSantis Signs Consumer Protection Legislation to Support ... https://www.flgov.com/2023/05/31/governor-desantis-signs-consumer-protection-legislation-to-support-florida-policyholders-when-disaster-strikes/
[5] Understanding the Florida insurance market - Marsh McLennan Agency https://www.marshmma.com/us/insights/details/understanding-the-florida-insurance-market.html
[6] Florida's home insurance crisis: What state lawmakers could do to bring ... https://www.fox13news.com/news/floridas-home-insurance-crisis-what-state-lawmakers-could-do-to-bring-down-rates
[7] Why Is Homeowners Insurance In Florida Such A Disaster? - Forbes https://www.forbes.com/advisor/homeowners-insurance/why-is-homeowners-insurance-in-florida-such-a-disaster/
[8] Reduce Property Insurance Costs - Press Release - The Florida Senate https://www.flsenate.gov/Media/PressRelease/Show/4543
[9] Governor Ron DeSantis Signs Bipartisan Property Insurance and ... https://www.flgov.com/2022/05/26/governor-ron-desantis-signs-bipartisan-property-insurance-and-condominium-safety-reforms/
[10] Citizens Property Insurance Corporation - Wikipedia https://en.wikipedia.org/wiki/Citizens_Property_Insurance_Corporation
[11] [PDF] The Difference a Decade Makes - Florida Office of Insurance Regulation https://www.floir.com/sitedocuments/thedifferenceadecademakes.pdf
[12] Property Insurance Changes - Florida Department of Financial Services https://www.myfloridacfo.com/division/ica/propertyinsurancechanges
[13] [PDF] The Case of Florida's Property Insurance Market” By Loril - SMU https://www.smu.edu/-/media/site/cox/departments/rmi/florida_market_synopsis_final.pdf
[14] Florida's Climate-Fueled Insurance Crisis - Boston University https://www.bu.edu/rbfl/2023/05/17/floridas-climate-fueled-insurance-crisis/
[15] How Florida lets insurance companies like Slide “cherry-pick” policies https://www.washingtonpost.com/climate-environment/2023/12/30/florida-insurance-citizens-slide/
[16] History - florida association of public insurance adjusters https://www.fapia.net/history.html
[17] Legislature's report on Florida insurance lawsuits is mixed https://www.tampabay.com/news/florida-politics/2024/01/08/florida-insurance-crisis-lawsuits-legislature-desantis-regulators/
[18] How Florida's Insurance Industry Has Changed Since Hurricane Andrew https://www.insurancejournal.com/news/southeast/2017/08/24/462204.htm
[19] A Case Study of Florida's Homeowners' Insurance Since ... https://hazards.colorado.edu/research/working-papers/96
[20] Florida lawmakers pass Citizens Insurance changes - CBS Miami https://www.cbsnews.com/miami/news/florida-lawmakers-pass-citizens-insurance-changes/