Legislation to hold down property insurance costs has been introduced by Senator Don Gaetz (R-Crestview) and Representative Alex Andrade (R-Pensacola).
“Floridians pay far more for property insurance than anyone anywhere else in the nation,” the two legislators said. “Admittedly, Florida is a high-risk market, but we believe there are steps the Legislature can take to improve how rates are set and how individual claims can be processed faster and fairer.”
“High property insurance rates are one of the reasons in-migration has slowed,” Senator Gaetz explained. “High insurance costs make the Free State of Florida into the Unaffordable State of Florida for many seniors on fixed incomes trying to stay in their homes, young families including military families trying to buy their first homes and businesses of every size.”
“The state’s sources of revenue are also impacted,” Representative Andrade said. “The State Economist’s three-year forecast shows that our ability to pay the costs of public education, health care and other important expenses of state government are negatively affected by the increasing costs of property insurance. Local governments, hospitals and school districts must pay for property insurance, too.”
SB 554 / HB451 would require insurance companies to promptly pay businesses and families who have suffered losses, streamline the adjustment process to eliminate delays and reach fair settlements, open the books of insurance companies that ask for rate increases and provide a way for attorney fees to be paid by each side during the claims process.
For the past two years the Legislature has attempted to hold down insurance rates by eliminating unnecessary litigation. Andrade and Gaetz say that hasn’t helped enough. Rates have continued to go up for the past eight quarters.
Gaetz and Andrade propose that adjusters, whether working for insurance companies or claimants, make their damage assessments available to each other quickly in a machine-readable format. Using software chosen by the state insurance commission, adjusters estimates would be subject to current data on market costs for repairs. This would eliminate protracted back-and-forth delays in reaching fair settlements.
The bill would also require insurance companies seeking rate increases to reveal any self-dealing with related companies. In recent years some insurers have moved premium dollars collected from Floridians to vendors, consultants or management companies owned or controlled by the insurance company. These behind-the-scenes transactions allow the insurance company to artificially depress its financial condition to justify a rate increase. One Florida insurer recently used self-dealing to move over $100 million to co-owned subsidiaries to obscure its true financial condition and obtain higher rates.
Because the internal operational costs of insurance companies are a significant factor in rate-setting, SB554/HB451 requires insurers to reveal the compensation packages of executive officers. In recent years there are examples of grossly excessive compensation of insurance company officers while the company, itself, was pleading poverty to regulators.
The legislation obliges the state Office of Insurance Regulation to use revelations of self-dealing and executive compensation when analyzing companies’ true financial condition and setting rates.
The bill also increases the penalty on insurance companies that drag their feet in paying settled claims and establishes what the sponsors say is a fair way for insureds and insurers to share the costs of litigation.
“There is no silver bullet that will automatically drive down property insurance costs,” the sponsors said. “But we need to do more than reduce litigation. Our bill tackles other drivers of insurance costs and provides a transparent framework for honest rate-setting and prompter payments.”
