There’s lots of speculation about the future for Fla.’s property insurance market. Six insurers became insolvent this year before Hurricane Ian hit.

Florida’s insurance market was in meltdown mode for two years before Hurricane Ian swamped Southwest Florida as a catastrophic Category 4 storm with 155-mph winds and record storm surge.

Six insurers have been declared insolvent so far this year, even with three relatively calm hurricane seasons. Annual insurance rates in the Sunshine State are three times the national average at $4,231, said Mark Friedlander, spokesman for the Insurance Information Institute (III).

Which raises the question: What now?

In Ian’s aftermath – as parts of the Gulf Coast including Naples, Fort Myers Beach and Sanibel were underwater before the storm’s eyewall reached the peninsula – industry analysts say more companies are expected to falter. In July, the Florida Office of Insurance Regulation placed 27 companies on a watch list over concerns they were not financially stable.

“It’s very possible that some of these insurers could fail because of Hurricane Ian,” Friedlander said.

A former state insurance official adds that last week’s catastrophic storm may well cost everyone a lot more to properly insure their properties going forward.

First up: Tallying the damage from Ian and deciding who will pay

Ian is predicted to become among the costliest storms to make landfall in the U.S. By comparison, Hurricane Katrina caused the most insured damage with $89.7 billion in 2021 dollars; Ida left $36 billion in damage; Superstorm Sandy caused $35.1 billion in losses; and both Harvey and Irma left $33 billion in insured losses, according to data from the III.

A major Wall Street firm, Fitch Ratings, said Hurricane Ian-related losses, which will mostly be tallied in Florida, will land somewhere between $25 billion and $40 billion. How much of that bill will be paid by Floridians is not clear yet.

Asked about the potential damage costs, DeSantis on Thursday pointed to federal backstops such as the national flood insurance program and U.S. Federal Emergency Management Agency assistance programs. He also noted that home insurance policies cover damage from powerful winds, but losses due to floodwaters are generally covered by the national program.

“There’s a lot of folks that have a homeowner’s policy. And sometimes they’re told that that could also be for flood and those are just different policies. The homeowners’ is from the wind, direct storm damage; the flood insurance obviously from rising waters,” the governor said.

Post-Ian Florida will face a deepened, exacerbated insurance crisis

As news reports and social media posts have shown, wind isn’t the only hazard Florida homeowners face. About 13% of homeowners in Florida have flood insurance, so many will most likely have to rely on FEMA grants, which won’t cover the full cost of the damage, Friedlander said.

If the reserves of Citizens Property Insurance Co. are wiped out, the state-run “insurer of last resort” that currently has more than 1 million policies, Florida residents could face multiyear surcharges on their homeowners’ insurance or auto policies, Friedlander added.

Plus, many of Florida’s undercapitalized insurers depend on reinsurance to ensure they pay out claims, but much of those costs are passed onto consumers, others pointed out.

Had Ian not made landfall in Florida, analysts still doubt the measures passed during the special session to address the property insurance would have eventually righted the ship.

“Even without Ian, we did not expect the legislation to stabilize the market,” Friedlander said, noting that lawmakers said the changes could take up to two years to have an effect. “Now that we have perhaps one of the top hurricane losses in U.S. history impacting Florida, the market is just going to get worse.”

Lawmaker, industry analysts call for further insurance reforms

Another issue affecting the private market is that as Citizens balloons, it’s limited by law in how much it can raise rates, putting further strain on competition in the marketplace.

A former state insurance official adds that last week’s catastrophic storm may well cost everyone a lot more to properly insure their properties going forward.

“In Florida, for a variety of reasons, our rates have not matched the risk,” said Lisa Miller, a former Florida deputy insurance commissioner. “This storm is going to expose that mismatch.”

Lawmakers also have to change tort laws to reduce the litigation, Miller said, citing a Florida insurance commissioner letter from April 2021 stating that Florida witnesses 80% of the nation’s insurance lawsuits but fewer than 10% of its insurance claims.

“That is the most compelling statistic,” she said.

Finally, Miller said insurance coverages in the state need to change. Basic policies should only cover “actual cash value” – meaning the value of what was lost – versus replacement cost, the total cost to replace that item.

“In Florida, it’s automatic replacement cost,” Miller said. “I can’t really buy down and save money.”

Replacement cost should be an additional expense if the consumer “wants a richer policy,” she said. “We’re doing it in reverse. We’re doing it backwards.”

Attorney who has litigated insurance claims for consumers pushes back

A lawyer who has represented homeowners in lawsuits against insurance companies said it’s non-paying insurers who are the cause of the crisis in Florida.

“The insurance companies blame the attorneys, but what if they paid the claims out as they should have?” said Nicole Shacket, supervising attorney for the Insurance Litigation Group. “Instead of paying a defense attorney to fight it, and ending up spending two or three times more than what they would have had to pay had they just paid the homeowner in the first place for the claim.”

Shacket, who has been doing insurance work for the past decade, said many homeowners who sue insurance companies are people who had have never filed a prior claim. In those cases, she said, the consumers have paid many thousands of dollars over many years for coverage and are just seeking to be reimbursed for damage that is supposed to be covered by the policy.

“Then they have a claim and the insurance companies just deny, deny, deny,” said Shacket, who said she has litigated hundreds of cases. “Deny and defend. That’s what they do.”

Shacket also said the changes to the assignment of benefits laws “have been horrible for consumers.”

Before the changes, a homeowner without deep pockets could agree to have insurance company pay the workers doing the repairs directly. Now, she said, people who don’t have the thousands of dollars handy to meet deductibles are at a dead end.

The next notch-up in the insurance crunch for consumers is at hand, Shacket added. She said insurance companies will demand that people replace roofs or appliances like water heaters as a precondition to coverage.

“So now all these people who have nothing wrong with their homes … they are going to be strapped. How are they going to pay for a new roof?” she said. “It’s horrible what is happening. The insurance companies caused it all.”

And post-Ian, Shacket predicts, those who have suffered damage are going to find themselves caught in a tug-of-war between the companies that sold them flood insurance and the ones that sold them wind policies.

The latter will point to a watermark, Shacket said, and refuse to pay for any damage to the dwelling below that stain. The homeowner, she said, will be caught helplessly in the middle between the two financial firms. “The fight will be over who should be paying for damage, between the flood policy and the wind policy,” Shacket said.

Consumers also need to be first line of defense against fraud

Miller also cautioned that it’s up to consumers to be the first line of defense against the kind of fraud that has so decimated the industry.

She said homeowners are being approached by individuals purporting to conduct roof inspections in connection with insurance companies. “There’s nothing illegal about that. It’s just very clever,” she said. “And it’s a hustle … and the hustle is real in Florida.”

Once the inspector gets on the roof, they intentionally damage it or claim you need a new roof. The contract that will accompany that advice will require the property owner to pay the difference between the price tag on that new roof and what the insurance company will reimburse.

The gap could put homeowners on the hook for tens of thousands of dollars in unreimbursed cost.

That heartburn, and financial ruination, can be avoided if consumers follow a simple piece of advice, she said.

“Don’t answer the door,” Miller advised. “Don’t answer the front door.”

– Article from the Palm Beach Post

When Disaster Strikes, Know Your Rights

We hope this never happens to you, but if you do suffer property damage due to a severe weather storm and need to file a claim with your insurance company, you may or may not know that you have the right to obtain your own representation.

Contact Claims Aid Consultants at 954-482-5246 or 772-249-7988 for a free, no-obligation property damage inspection throughout the state of Florida. We ONLY work for you, not the insurance company! Our public adjusters will help you navigate through the entire claims process to get you the best settlement and your home renovated and repaired as quick as possible.