By Butch Swank
By nature, I am a numbers guy. They help me to paint a picture in my mind and better understand things. Let me share some numbers with you. In 2019, Florida accounted for roughly 8% of all homeowners’ claims in the United States. Here’s where the story gets a twist: 76% of all these lawsuits were filed in Florida in the entire US. In my mind, there is not a better set of numbers to explain why our home insurance rates go up, up, and up.
If I haven’t made you feel sick yet, I’ll share one more. From the years 2013 to 2020, $15.2 Billion was paid out due to these lawsuits. Just $1.2 billion (8%) of that went to the policyholders. $3.2 Billion (21%) went to the attorneys defending the insurance carrier. The remaining $10.8 Billion (71%) went to the attorneys that filed the suits. The attorneys got, literally, ten times the amount the policyholders got. Does this seem like a healthy situation? If you’re an attorney? Absolutely! We live in a capitalist society and, assuming they’re playing by the rules, more power to them. However, there are 6.5 million homeowners. Suppose we divide that $10.8 Billion between us; we’ve been paying attorneys $237.36 each year for seven years. That’s $1,661.54 each.
Wait, wait, there is good news! Our Legislature was hard at work this Spring and successfully passed Senate Bill 76. There was a fierce battle to get it done, and it was the last bill to be approved by our State Legislature before they ended the session. The bill curtails contractors and Public Adjusters from soliciting homeowners to file suits for roof damage. It has a provision to replace one-way attorney fees. If an insurance carrier is sued, they must pay for their own defense and the plaintiff attorney’s bills. In short, they are paying a lawyer to sue them. That means our insurance rates go up the more they are sued. The new plan would remove this and control what the attorney gets paid depending on the settlement amount. The thinking here is that the attorneys will begin asking for more reasonable amounts to collect their legal fees still. For reference, the average non-lawsuit claim amount is $11,000. The average litigated claim is $54,000.
The consensus in the home insurance carrier world is that Senate Bill 76 got about 40% accomplished of what was needed to fix our market truly. The primary item missing was allowing insurance companies to offer Actual Cash Value(ACV) for roofs. Right now, the rules make insurance companies pay for a brand new roof if your 28-year-old roof is damaged. Unless a house burns down, the roof is the most expensive component of a home. Allowing ACV for roofs would let people with older roofs select ACV so they could also enjoy lower premiums. If you get a new roof, then the carrier would go back to Replacement Cost for the roof. These days, not everyone can afford a brand new roof, so this was a reasonable approach to help homeowners with insurance rates while also reducing the exposure to carriers. It’s common sense that an older roof is more prone to damage from a storm, so the carriers are forced to charge more to insure older roofs.
All of this has made the market for homeowners insurance challenging. Many carriers simply won’t write roofs over ten years old now, and others are simply not writing ANY new policies. Additionally, carriers are dropping agents all over the State, which means many agencies have limited to zero options now for their homeowner clients. Because Goodlad & Swank works with over thirty carriers, we still have plenty of opportunities to find solutions for many who are struggling with either crippling rate increases or carrier cancellations.
Here’s the bottom line – there is still a lot of work for our Legislature to do. To have a healthy and competitive insurance marketplace, insurance companies need to know we have rules and policies in place that will not harm them. If we can do that, we will have an influx of companies that have long stayed away from Florida because they did not want the risk and uncertainty. A competitive marketplace helps consumers because carriers compete for your business. I implore you to take ten minutes to contact your local legislators. Let them know they did some nice work earlier, but the job is not finished. They need to hear from you, or not much will change. The legislators I personally spoke to all said they need to hear from you to see real change. Also, I raised all kinds of Cain with them, so I am confident they prefer to hear from you instead of me again! The Florida House of Representatives has a great website to help you. Here it is: https://www.myfloridahouse.gov/findyourrepresentative
Goodlad & Swank Insurance, LLC.