Encouraging Insurance Legislative Changes in Florida

Attracting Insurers to the Florida Property Insurance Market

By Jay Hancock / Published January 2024

There have been many legislators, attorneys, contractors, public adjusters, insurance consumers, and others that have extensively questioned the logic of the legislative changes made by the Florida House and Senate in special sessions and regular sessions in 2022 and 2023 that were designed to improve the Florida property insurance market. Many have said that it was a payoff to insurance companies for donations to legislators. Others have said that it would cripple the ability of consumers to have advocates against insurers at claims time to represent their interests against any unscrupulous actions taken by insurers. Still others have said that it would have zero impact on the number of insurers that were willing to write property insurance in Florida.

     Well, apparently those cynics are unaware of the true impact it has had on how insurers view the changes. To date there have been 16 new property insurers approved to do business in the State of Florida, and a number of others also have applied. This is an absolute win and victory for all property insurance policyholders in Florida as we all know competition helps drive costs down and improves the terms and conditions that are available.

     This is not to say that all insurers acted reputably after any loss with their insureds and that they deserved some much-needed protections from the legislature. What I am saying is that there are disreputable attorneys, insurance companies, public adjusters, insurance adjusters, insurance agents, contractors, and consumers just like there are disreputable doctors, chefs, nurses, and waitresses or waiters. In other words, there have been and will continue to be disreputable people in all walks of life. The action taken by the legislature was designed to not reward bad behavior by some bad actors on both sides of the insuring agreement.

     As a matter of law it is now not permitted for an attorney to receive full compensation for their attorney fees if they collect one more dollar in claims proceeds than was originally offered by the insurer to the insured. It seems reasonable to me that an attorney that represents a policyholder/insured should have the best interest of their client in mind and not their own best interest. If indeed an insurer is not paying a fair and just settlement to their client, then shouldn’t the attorney be satisfied to earn a percentage of the excess settlement over and above what the insurer previously offered the policyholder and negotiate that percentage with their client? Better yet, if the amount offered by the insurer is so egregious, then shouldn’t the attorney be willing to take their chances before a jury with the amount of the settlement and stipulate that their attorney’s fees should be paid in excess of the settlement for their client, based upon the negligent and egregious actions taken by the insurance company?

     The legislation also no longer allows a policyholder to assign the benefits of their policy to a third party such as a public adjuster, attorney, or contractor. This was a much-abused tactic utilized by many to take advantage of unknowing parties, whereby the policyholder would completely give up their rights under the policy by assigning the benefits of their policy to someone else. That would allow that party to settle the claim with their insurer and to receive the settlement amount themselves. This goes back to our earlier comments on unscrupulous parties taking advantage of unknowing individuals. At the end of the day, bad actors have abused assignment of benefits in the State of Florida after catastrophic losses to the detriment of their clients and those clients’ insurers for far too long.

     Also, now as a matter of law there are timeframes in which insurance companies must make an initial inspection of the loss, provide the policyholder with an estimate, and make an initial offer for settlement. These timeframes, if not met, all come with legal penalties and jeopardies for the insurers. In other words, this legislation wasn’t passed to simply provide protections for the insurers against attorneys, public adjusters, or contractors. This law was passed in an attempt to clean up bad actors on both sides of the equation.

     After working hundreds of millions of dollars in claims after catastrophic losses across the State of Florida, being a property and casualty insurance agent in the State of Florida for nearly 40 years, and seeing the difference in how insurers and insureds have changed their perspective on property insurance claims during that time, I would say we were far overdue for some legislative changes. I am not saying that either side of this equation has been right in the way they have arrived at their current state of mind as it relates to how they believe property insurance claims should be settled. What I am saying is that both the insurers and the insureds have made some very poor decisions along the way that have led us to where we are today.

     Insurers have largely taken the position that they would rather hire third-party administrators (TPAs) to run their claims process for them rather than incur the expense of a full-time claims department and make decisions that reflect the direction and integrity of their organization. These TPAs have created their own standards, or lack thereof, for claims settlement, and they recognize who hires them to settle their claims. This consideration, whether the insurance companies and TPAs admit it or not, provides incentive to the TPAs to settle claims at a lower cost for the party hiring them than the loss may otherwise be deserving of. The expression “delay, deny, and defend” has become a real thing; and until the insurers recognize and come to grips with the prevailing attitude of the parties they are hiring to settle their claims, this trend will not change. Most of the hired TPAs pay their adjusters and consultants an hourly rate, so the longer it takes to settle a claim, the more individual adjusters and consultants can bill the insurance companies. This is a large incentive for those same TPAs to delay, deny, and defend. Whether that is the intent of the insurance company or not, it is what they have created by farming out their claims’ services. I can assure you that there are many insurance companies that intentionally instruct adjusters to do this as well, as we have heard testimonies after catastrophic losses from many adjusters stating such. Most of the time the truth is that the insurance industry is completely understaffed with qualified personnel able to respond to catastrophic losses. They end up hiring any breathing bodies they can find that will show up, and often this gets a claim off to a bad start from which many never recover.

     In contrast, the insureds/policyholders have made the decision that all insurers act disreputably, and they need to hire attorneys and/or public adjusters to represent their interests. The truth is that there still exist insurers that want to do the right thing. However, they are faced with the challenge of receiving conflicting information from their often overworked, unqualified, and sometimes self-serving adjusters, consultants, and engineers. The insured/policyholder becomes exasperated and frustrated with the process and the amount of time it is taking, and he ultimately seeks assistance to help resolve the issue rather than doing the hard work it may take to provide contractor estimates, bills, or other information to justify the claim. It is understandable given they have just suffered a catastrophic loss, and all they feel they want is for the insurer to bring them back to pre-loss condition. However, they want them to do so much faster than the system created by the insurance company to settle their loss is capable of doing.

Photo by iStockphoto.com/Zephyr18

     When I first began in this business, there was a much smaller number of TPAs being utilized; and after any catastrophic loss all insurers had people with draft authority on the ground immediately in the affected communities. This allowed individual representatives of the insurers to make on-the-ground decisions swiftly and get money in the hands of their policyholder/insureds immediately to make temporary repairs and begin to get their lives back together. This was a show of good faith to their policyholders/insureds and provided them with a sense of security, knowing the intent of the insurer was to help them in their time of need and provide them with assistance. Ultimately that is what insurance is supposed to do. You pay a premium to pass the risk on to an insurance company to pay for damages caused to your property by an insured peril. You expect them to respond swiftly and fairly if you incur damage to your property that is covered by the policy you purchased from them. When they don’t do so, you feel they are violating that agreement. You didn’t sign up to be part of a system they created that is inept, incompetent, or, at worst, intentionally corrupt.

     I have had the pleasure over the last month or two to come in contact with some insurers that have recognized these shortcomings within the insurance industry and are designing their product offerings to avoid these scenarios. It is exciting to see the interest the new legislation that has passed through the house and senate has created amongst insurers, and their willingness to enter the property insurance market in Florida. It is even more interesting that some recognize the shortcomings of the standard insurance claims industry process and are willing to invest in what they deem to be a better, swifter, and more equitable way of handling claims.

     I think we all know and realize that creating competition for property insurance in Florida is the only way that we will see the insurance market in Florida begin to improve as it relates to terms, pricing, and conditions. The intent of the legislative action taken in 2022 and 2023 was to attract more insurers into the property insurance arena in Florida and to provide further protections for policyholders in Florida against insurers that act unscrupulously following a loss. It appears the changes have had their desired effect as it relates to the attractiveness of the Florida insurance market to insurers. Since we mostly avoided any large catastrophic losses during 2023, it still remains to be seen if the legislative changes will bear fruit for policyholders/insureds as it relates to the responsiveness of insurers. We are hopeful that it will and that more insurers in the state will mean more choices for consumers, and which in turn mean better claims service for those that seek it. 

Jay Hancock

Account Executive Condominium Specialist / HERT Claims Supervisor and Claims GPS Contributor, Claims GPS

     Jay Hancock is an account executive condominium specialist / HERT claims supervisor and Claims GPS contributor in Panama City, Florida. For more information call 850-896-5740 or email Jay.Hancock@acentria.com.