Florida legislature adopts major changes to auto and property insurance markets

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Florida lawmakers passed two bills on the last day of their 2021 legislative session that bring major changes to the state auto and property insurance markets.

The actions follow weeks of alternative debates on the proposals between the House and Senate chambers.

Stakeholders say none of the potential new laws will be enough to meet lawmakers’ goals of reducing rates or eliminating fraud in their respective insurance industries. Both bills are now headed to Governor Ron DeSantis, who will need to sign them before they can become law.

Senate Bill 76

The bill attempts to address some of the problems plaguing the state’s home insurance market, where insurers lost over $ 1.5 billion last year. It was adopted Friday in the Senate by 35 votes to 5 and 75 votes to 41 in the House.

The legislation was significantly revised from its original form at the start of the session and includes:

  • Change in eligibility, rate descent path and currently strong rate indication for Citizens Property Insurance Corp.
  • Replacement of the law on one-way attorneys’ fees so that the recovery of attorney’s fees and costs is conditional on obtaining a judgment for compensation that exceeds the pre-prosecution offer made by the insurance company.
  • Reduction of the claim period for all claims to two years from the date of loss, except for additional claims which will have an additional year.
  • Require plaintiffs to file a pre-trial claim at least 10 days before filing a claim against an insurer that includes an estimate of the claim, attorney fees and charges required and the amount in dispute; prohibits the filing of pre-lawsuit notices with the insurance company to determine coverage; and allows an insurer to require mediation or other form of alternative dispute resolution after receiving notice.

The bill also makes several changes to tackle what insurers claim to be an explosion of roofing claims and litigation. Specifically, SB 76:

  • Makes it illegal for roofers or anyone acting on their behalf to engage in “prohibited advertising”, including electronic communication, phone call, or material soliciting a complaint.
  • Prohibits offering anything of value to perform a roof inspection, an offer to interpret an insurance policy or file a claim, or to adjust the claim on behalf of the insured.
  • Prohibits a contractor from providing repairs for an insured with a repair contract that does not include a detailed estimate of the costs of labor and materials required to make the repairs.
  • Adds the possibility of a fine of $ 10,000 for each violation by roofers.

Removed from the final legislation was the elimination of the state attorney’s fee multiplier and allowing insurers to include policy wording that offers real cash value instead of the full replacement cost on the roofs. . The industry had urged lawmakers to include these provisions to combat cost drivers, but it has become a sticking point in both chambers. An amendment passed on Friday also eliminated offers of judgment for the insured or the insurer.

Senator Jeff Brandes, who co-sponsored the bill, voted to pass the bill, but said it was only a “40% solution to what is needed in Florida to bend the cost curve ”.

“Hopefully this stabilizes rates, but ultimately does nothing to bring them down,” he told his colleagues.

Locke Burt, chairman and CEO of Florida-based insurance company Security First, said he was disappointed lawmakers failed to undertake reforms on the effects of two Florida Supreme Court cases – Joyce vs. FedNat (2017), and Sebo v American Home Assurance (2016) – who are believed to be partly responsible for perpetuating litigation in the state, as noted in a recent report by Florida Insurance Commissioner David Altmaier. But, said Burt, the legislation that was passed makes much-needed changes and is a “step in the right direction.”

“I would characterize it as one step,” he told Insurance Journal. “But I would also tell consumers that their prices will continue to increase.”

Senator Jim Boyd, who is also an insurance broker, admitted that the bill is far from perfect and that no one, including the insurance industry and the testing bar, is happy with the result.

However, he noted, “we have to do something. We cannot wait until next year to resolve what is an extremely important issue for our constituents. “

Rep. Bob Rommel, who worked on the House version of the bill, said the legislation would monitor insurance companies, help attract new carriers to the state of Florida and “make sure that homeowners will have a competitive market and will have the right to choose the right insurance for themselves.

The Florida Office of Insurance Regulation (OIR) said in a statement that it “appreciates the tireless work of the Florida Legislature to enact meaningful property insurance reform. SB 76 protects consumer rights and responds to current challenges in the property insurance market. “

If signed by DeSantis, the new law will come into force on July 1, 2021.

Senate Bill 54

Florida’s passage of this bill will repeal the state’s No-Fault Personal Injury Protection (PIP) system and instead require mandatory personal injury coverage starting at $ 25,000 for all drivers. of the State of Florida. Earlier versions of the law required insurers to offer medical coverage (MedPay) in the amount of $ 5,000 or $ 10,000, but the adopted version makes the offer optional and includes an optional MedPay death benefit of 5,000. $.

The bill will also create a new framework to govern the handling of motor vehicle claims and the bad faith failure of third parties to settle claims against auto insurers. A House amendment passed this week added a statement that the law governing such bad faith actions is not intended to expand or reduce any cause of action currently available against insurance agents who sell insurance agents. auto liability insurance policies in this state.

Brandes, one of three Senators to vote against the bill, said his sponsors had not done enough to study how the bill would affect rates.

“Florida already has some of the highest rates in the country and unfortunately if you’re just having a hard time getting there… [and] by buying only PIP today, rates will increase by 40%, ”Brandes said.

But the bill’s sponsor, Danny Burgess, a Republican, argued that a 2016 IRO study showed rates would drop if the state repealed PIP. He said the bad faith provisions will also help stop PIP fraud and lead to further rate cuts.

“It is difficult to predict market forces, but the data overwhelmingly shows that we will see a [rate] reduction, ”he said. “Certainly not a significant reduction, but I think we’ll see a reduction.”

However, many industry players and stakeholders have contradicted this assessment.

The professional insurer group, the American Property Casualty Insurance Association (APCIA), opposed the passage of the bill, saying it could increase the rates for Florida drivers and increase the current rate of non-insurance. 20% state insured.

He worked on an actuarial study to assess the impact of the bill and said his analysis shows it could increase the average auto insurance policy cost by 23% or $ 344. Drivers with the lowest levels of coverage could see increases of up to $ 805 per year.

APCIA said more than 28,000 letters from Floridians had been sent to lawmakers opposed to the bill. The group encourages the governor to veto the legislation.

“As SB 54 heads to Governor’s DeSantis office, it has the opportunity to protect Florida drivers from higher auto insurance costs and help keep our roads safe by vetoing this. legislation, ”APCIA said.

The Personal Insurance Federation of Florida (PIFF) and the Consumer Protection Coalition (CPC) are also encouraging the governor to veto the bill.

“We are extremely concerned that this bill would dramatically increase rates for our customers and Florida residents who can least afford an increase, while forcing hundreds of thousands of Floridians who are already struggling to pay.” the current premiums for driving without insurance, ”said Michael Carlson, President and CEO of PIFF.

“On behalf of Florida consumers, the CPC urges Governor Ron DeSantis to consider the potential cost impact this legislation will have on Florida consumers and to consider vetoing the bill if it turns out to be. that it increases tariffs and does not decrease litigation, ”said the group.

If signed by DeSantis, the new law will come into force on January 1, 2022.

This is a developing story …

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