TALLAHASSEE, Fla. – Gov. Ron DeSantis has said he will sign a new law that aims to address skyrocketing homeowners insurance rates by reducing litigation, but part of the deal also allows Florida’s insurer of last resort to raise rates year over year at a higher pace than in the past.
Citizens Insurance offers coverage to Floridians who can’t find or afford private coverage.
Roughly 5,000 Floridians sign up for policies with Citizens each week.
“That type of growth is unsustainable,” said Michael Peltier, a spokesperson for Citizens.
That claim motivated lawmakers to allow the company to go beyond its current 10% annual rate increase cap in the homeowner’s insurance reform bill that passed the 2021 legislative session this year.
The cap on Citizens’ 10% annual rate increases will grow by 1% each year until reaching a max of 15% in 2026.
“It’s going to allow us to close that gap in some cases with private carriers so that more customers can find their insurance in the private market,” Peltier said.
The legislation also includes numerous changes to the claims process in an effort to reduce litigation costs, which insurance companies blame for driving exorbitant rate increases.
When approved by the governor, claimants will have to pay their own attorneys fees if they settle a claim for less than 20% above the insurer’s initial offer. If the settlement is between 20% and 50% higher, the insurer will have to cover a portion of the claimant’s attorney’s fees. If it’s above 50%, the insurer will have to pay all attorney’s fees.
The bill also prohibits solicitation by contractors, who have often offered gifts to homeowners in exchange for the ability to inspect roofs and make claims with insurance companies.
Even with all of the litigation reform in the bill, rates are still expected to rise in the near future for both Citizens and private companies’ policyholders. Democratic State Sen. Gary Farmer argues because efforts to guarantee rate reductions in the bill were rejected, the reforms only stand to benefit insurance companies.
“All it’s going to do is enable insurance companies to be more bold and aggressive in denying and underpaying claims,” Farmer said.
But State Sen. Jeff Brandes, who co-sponsored the legislation, believes the reforms in the bill will prevent rate hikes in the long run that could result in a catastrophe for policyholders.
“In absence of this bill passing, you could see rates double within the next two to three years. Rate increases of 30% or 40% are going to become common over the next two years if we do nothing,” Brandes said.