TAMPA, Fla. — Homeowner's insurance rates will continue to go up for at least two more years as legislators work to control lawsuits filed by attorneys on behalf of roofing contractors.
Many people will be surprised to learn Florida's homeowner's insurance woes that we are currently facing are getting fueled by something other than inclement weather.
"These are not storm-related losses that are impacting Florida homeowners," Mark Friedlander, Director of Corporate Communications at the Insurance Information Institute, told ABC Action News reporter Michael Paluska.
"What we're seeing are some ongoing issues that we've been trying to address with the state legislature for several years. Rampant roof repair schemes, really roof repair fraud schemes, and tied into that runaway litigation filed by a select group of attorneys across the state."
Wildfires, hurricanes, disastrous floods, tornadoes and snowstorms have all taken their toll on the industry.
According to the National Oceanic and Atmospheric Administration, "the U.S. has sustained 310 weather and climate disasters since 1980, where overall damages/costs reached or exceeded $1 billion (including CPI adjustment to 2021). The total cost of these 310 events exceeds $2.155 trillion."
But, industry analysis shows Florida's storm is something entirely different, and the financial impacts to all of us are staggering.
"If a roofer comes knocking on your door and promises you a free roof that will be covered by your insurance, it's time to say no thank you and close the door," Friedlander said. "Because what's happening is that's not only going to impact you personally down the road. It is impacting all your friends, neighbors, and relatives; everybody is paying for your free roof."
The insurance industry is losing billions to unnecessary lawsuits from third-party contractors. According to Guy Carpenter Industry Financial Reporting, in the first three quarters of 2021, financial results show that property insurers had $1.22 billion in underwriting losses.
Between 2013 and 2020, Florida's property insurers paid out $15 billion in claims costs. Only 8% percent of that was paid to consumers, while 71% was paid to attorneys. That is more than $10 billion. Floridians are now spending an average of $3,600 a year for homeowners insurance, double the national average.
"Let's just give an example, $100,000 settlement $70,000 is going to the attorney, and maybe the other $30,000 is going to the roofing contractor. The policyholder is not even involved," Friedlander said. "So what may be just, say a $5,000 to $10,000 repair to a roof could run well into six figures."
Last summer, Florida Gov. Ron DeSantis signed a bill to curb litigation. The new law forbids contractors from soliciting homeowners to file roofing claims. The law also narrows the time frame in which homeowners can file claims.
"In fact, we're seeing the opposite impact, and we're seeing more roof solicitations, door to door solicitations, than ever before. And we're seeing a rise in related litigation," Friedlander said.
Insurance agents say more needs to be done to stop the problem. Jeff Italiano, the owner of Italiano Insurance in Tampa, explained how roofers and lawyers are pulling this off.
"It's called assignment of benefits, AOB, that's when a homeowner signs his rights away to a roofer, and then the roofer goes after the insurance company for all they can get," Italiano said. "Many insurance companies have now put in their policy forms in their contract that you cannot assign your benefits cause when people assign their benefits, they are getting taken advantage of."
Italiano said his office is now slammed with residents trying to find new insurers. In 2021, more than 50,000 policyholders were dropped. Italiano expects that trend to continue. And more and more people are getting pushed into what Italiano calls "the insurer of last resort," state-run Citizens Property Insurance Corporation.
"But, what's happening now as the insurance companies have to raise their rates, and in many cases, Citizens might be cheaper. So, people are flocking back to Citizens, The problem with Citizens is that it's underfunded. So if we have a big loss, there may not be enough money to pay all the claims."
Citizens is currently receiving about 4,100 new policies a week, an average over the past five weeks. That is likely to go up to about 4,500 to 5,000 per week.
"Despite the rapid increase in policies, Citizens remains in a strong financial position. We have a $6.5 billion surplus. We also purchase reinsurance and sell bonds on the global market to help protect that surplus. Citizens is in a position to handle a 1-100 year storm without exhausting its surplus and having to levy assessments," Michael Peltier, Media Relations Manager for Citizens, told Paluska in an e-mail.
"Such a storm, however, would eat up a significant amount of our surplus. If Citizens exhausts its surplus following a major storm or series of storms, it has the ability to levy assessments on its policyholders and other Florida insurance consumers to pay claims. As such, we remain able to pay claims even if our surplus is exhausted."
Peltier added that the private market is key to protecting homeowners in the future.
"Citizens Chairman Carlos Beruff and Citizens President/CEO Barry Gilway have both made it clear that the current trend in policy increases is unsustainable. In the long term, a healthy private insurance market is the best solution," Peltier said.
Unless Florida legislators fix the runaway litigation, industry experts worry what a storm impacting our state in 2022 could do to our public and private insurance market.
"If we saw a major storm, a major catastrophe, or hurricane-level catastrophe, there could be other insurers that go insolvent in Florida," Friedlander said.
There are ways to get discounts; here are some tips from Friedlander:
- Bundling your home and auto coverage with the same insurer (can save up to 20% on each policy).
- Increasing both your standard and hurricane deductibles, but you need to be financially prepared to pay more out of pocket for a covered loss.
- Having a monitored burglar alarm or monitored fire alarm.
- Making your property more resilient to severe weather. Invest in items that will harden your property against wind damage, such as roof tie-downs, a wind-rated garage door, and storm shutters.
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Correction: A previous version of this article misstated how roofers were getting around state regulations. The loophole for Assignment of Benefits was closed by legislation. Now, contractors are getting around regulations by using what's called a Direction to Pay agreement.