The Florida property insurance market is headed towards a crisis that could significantly impact both the insurance industry and those who are insured. It's not a situation that hasn't been expected. Florida is fraught with perils that can lead to property damage. From wind and flooding damage from hurricanes to theft, vandalism and fire damage, the state has long been ravaged—and the insurance market pummeled—by unrelenting risk.
Non-Catastrophe Water Damages Driving Claims
That risk is coming to a head according to a two-part piece in the Insurance Journal. As Amy O'Connor (@amyohconnor), the Southeast editor for Insurance Journal (@ijournal) and associate editor of MyNewMarkets.com writes, the uptick isn't solely impacted by hurricanes. In fact, she says: "Over the last several years, insurers have consistently cited evidence of excessive first- and third-party litigation from non-catastrophe water damage losses across the state." Although Florida has certainly been hit by a number of major catastrophes, O'Connor says that "the frequency and severity of lawsuits on non-cat losses has been unprecedented."
While overall litigation for third party assignment of benefits (AOB) have dropped, carriers are still experiencing high levels of first party litigation along with excessive attorney fees, O'Connor says. In addition, strict underwriting guidelines limit what carriers can do in an attempt to recoup losses.
No Simple Solutions
It's not an issue that leaders in both the insurance and legal industries aren't attempting to address. The solutions though may not be simple and likely will also include a certain amount of contention from a variety of fronts.
Legislation may provide the fix, according to the Insurance Journal. As O'Connor writes: "The industry says the only way to stem the tide of rising litigation and rates is to enact legislation that addresses the market's cost drivers." A couple of options: shortening timeframes for initial hurricane loss claims to two years (currently three) and doing away with property lawsuits' contingency fee multiplier. Texas has passed a similar law that may provide a model.
Agents can also be part of the solution. Those representing property owners in Florida should not simply be sitting back to see where the chips fall. Communication and education about what can be a very complex issue is important. What could you be doing to get involved?
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