Despite new laws going into effect this year to reform the insurance industry in Florida, thousands of policyholders are getting notices of rate hikes this month. Some increases are as high as 60% compared to last year. In addition, thousands more are getting notices of non-renewals due to their roof’s age and are scrambling to find affordable coverage.
Policyholders are rightfully frustrated. SB76 was hailed as the “bill that would save Florida’s Economy.” Lawmakers promised it would end a decade-long trend of rising rates by reducing costly legislation. In the end, insurance companies were able to offer less coverage and avoid penalties for bad faith actions. Many are asking how insurance companies can justify rate hikes now that the new laws have made it easier for them to make more money. We believe the answer lies in how insurance carriers manipulate data in their best interests.
How Carriers Create Artificial Inflation
Southern Fidelity is just one of many insurance carriers asking for increases and blames “higher litigation costs and the rising cost of reinsurance” as the driving force. They provided reports to insurance regulators to justify the double-digit rate hike they are asking for this year. The only problem? The data used was based on another company’s customers. This is just one example of how insurance carriers can create artificial inflation by manipulating data.
The report Southern Fidelity gave to regulators was based on homes that averaged $300,000 or more and were built in 2021. Admittedly, the report was not representative of Southern Fidelity’s customers. Had they used their own data, would it show a rate increase was actually needed? When asked to provide clarification on the data, Klayton Southwood, a consultant for Southern Fidelity, said, “This has been the standard process that we’ve followed in all of our recent filings….”
What Happens When Rate Hikes Are Denied?
Insurance regulators have not approved Southern Fidelity’s request for a rate increase. However, the carrier has said they may not be able to operate without it. As a result, over 50,000 policies have been canceled this year in Florida; many of those were Southern Fidelity customers. For most, this means getting coverage through Citizens Property Insurance Corporation, the insurance company of last resort. This is a lose-lose situation for policyholders, especially for those who have been dropped from existing coverage. In addition, thousands more are expected to lose coverage this month as insurers like Gulfstream cancel policies and exit the state.
Perhaps the bigger question regarding how insurance carriers manipulate data is if it’s actually possible to run an insurance company effectively in Florida. Join the conversation and follow us on Facebook and LinkedIn to tell us what you think.
About American Adjuster Association
State laws, policies, and inaction from insurance companies hurt those who need help the most: policyholders trying to recover from a catastrophic and unplanned situation. These often result in moral hazards and economic disaster for the most vulnerable people. We believe it is our responsibility to fix this. Apply online now to become a member and join our mission.
