Florida policyholders have been promised lower insurance rates for years by legislators and lawmakers. As recently as 2019, a new law went into effect that aimed to reform the market and make coverage affordable. Known as the “AOB Law,” it was the most heavily lobbied bill during the session. It was primarily supported because carriers promised to reduce rates.
Two years later, lawmakers are back at it again with a new reason for rate increases and new bills to solve the crisis – HB305 and SB76. Unlike the AOB law, these bills cut coverage, reduce repercussions for insurance carriers and force policyholders to pay more out of pocket.
Will HB305 and SB76 lower insurance rates, or are lawmakers crying wolf?
If history indicates how HB305 and SB76 will lower insurance rates, the answer is they won’t.
What Is The AOB Law & Did It Lower Property Insurance Rates As Promised?
According to the Florida Office of Insurance Regulation, Assignment of Benefits (AOB) agreements were to blame for driving up property damage insurance costs. This led to House Bill 7065 (AKA the AOB Law) to reform perceived abuses. Lawmakers promised this bill would lower premiums and help stabilize the insurance market.
The new law went into effect in July of 2019. Before this, Citizens Insurance reported that a minimum of 3% of their customers would see lower premiums. Once passed, Citizens lowered their rate increase from the projected 8.5% that year to only 2.3%.
The number of AOB lawsuits also dropped. According to data released by Citizens Insurance, once the reforms took effect in July, the number of AOB lawsuits was down to 707 per month. The total number was reduced to 468 cases in August, 375 in September, and 374 in October.
All signs indicated the AOB law did what it was supposed to: lower insurance rates and reduce litigation. In November 2019, Citizens President Barry Gilway said: “I really believe that we have substantial facts, substantial data – that all the work that was done that came together to pass AOB will have a huge impact. We have some initial indication that it is working.”
At the end of the day, all this did is reduce the recourse that contractors might have to pursue a breach of contract lawsuit against a carrier who underpaid the claim. Let’s not forget that the only reason people sue insurance companies is when it’s the last resort. The causation of the dispute and subsequent lawsuits is the initial claim underpayment. Nobody is clamoring to sue an insurance carrier.
What Happened To Florida Insurance Policies in 2020?
Not even 12 months after Citizens Insurance reported signs of improvement, they released a report requesting a 3% rate increase. Some insurance carriers increased rates by as much as 30% in 2020.
What led to insurance companies praising AOB reform and promising to lower rates only to increase rates a year later?
The insurance industry blames the 2017 and 2018 storm seasons. According to an email from Florida’s Office of Insurance Regulation spokesperson Karen Roach, “the challenges are largely due to increased litigation, higher catastrophe claim losses as a result of multiple hurricanes over the past several years, and rising reinsurance costs.”
Insurance companies rely on reinsurance to protect themselves from catastrophic events like hurricanes. It’s essentially an insurance policy for insurance companies. After years without hurricanes, Florida carriers did not adequately protect themselves with reinsurance in 2017 or 2018. This left them covering the reported $20 billion in damage from Hurricanes Irma and Michael by draining profits.
Insurance companies offset the losses from a lack of reinsurance by raising rates.
The New Scapegoat: First Party Lawsuits & Attorneys
Two years later, policyholders are reporting double-digit rate increases as high as 60% – despite the reforms and promises made in 2019. Insurance carriers and their lobbyist also have a new reason for rate increases, but this time it isn’t AOB’s. According to carriers, property insurance rates are increasing by up to 60% because of lawsuits and attorneys taking advantage of the system. HB305, SB76, and several other bills have been created to solve the problems and lower premiums.
Sound familiar? This sounds a lot like the same kind of gaslighting that happened a few years ago.
This legislative session is very similar to the one in 2019. Lawmakers have found a scapegoat, created a “crisis,” and made promises to lower rates with the new legislation. They have pulled out the big guns. Some representatives supporting HB305 and SB76 have even created websites to rally support.
HB305 and SB76 Would Make The Following Changes:
- Attorney fees may not be paid by insurance carriers, even if they make a mistake that causes the need for litigation
- Insurance carriers do not have to pay for full roof replacement, even if the damage is caused by a covered peril under the policy
- Insurance carriers do not have to pay for covered damage if it is found outside of the 2-year time limit
Nothing in any proposed legislation protects policyholders, but everything listed allows insurance carriers to make more money by providing less coverage.
Related: Insurance companies wrote SB76 to benefit insurance companies
HB305 and SB76 have been criticized as the most anti-consumer legislation ever proposed. Despite that, lawmakers continue to use promises of lower insurance rates as a means to make HB305 and SB76 law. Lawmakers have yet to provide anything other than speculation about how these bills will lead to lower rates, and carriers have already proposed additional increases for 2021.
The reality is the only ones to blame for the insurance crisis in Florida are the insurance companies themselves. Had they obtained adequate reinsurance policies, they wouldn’t be dipping into profits to pay damages from policies they sold.
If passed, Florida policyholders will be left subsidizing one of the largest and most profitable businesses in America: insurance companies.
Tell Lawmakers To VOTE NO
SB76 and other related bills could go into effect this year. Lawmakers need to hear from policyholders NOW on the negative impacts of this legislation. Click here to connect with Florida lawmakers and make sure your rights are protected. You’ll be able to send a tailored message in less than 60 seconds to your elected officials.
