Inside the Florida property insurance crisis

Florida’s property insurance market is in trouble.

“For the past two years, private companies operating in Florida have had a combined negative net income of $1 billion. So the market is essentially being shut down.”

It’s bad for homeowners, too.

“Consumers are on life support now. They are … paying more money for less coverage.”

When a market craters like this, something fundamental has gone wrong. In Florida, it comes down to one thing: litigation.

“Florida has 8% of the claims and 79% of the litigation, so there is something very, very wrong with that.

“And I don’t think anyone can logically explain that kind of differential other than that the statutes in Florida are being abused.”

today, On point: Florida property insurance meltdown. Can it be fixed?

The guests

Mark Friedlander, director of corporate communications at the Insurance Information Institute, a nonpartisan nonprofit organization. (@ markfri09)

Jeff Brandes, Florida’s Republican state senator since 2012. Author Senator Jeff Brandes calls for special session on insurance. (@JeffreyBrandes)

Also featured

Mandy Wellsa homeowner in Cape Coral, FL

Joe Carluccico-owner of Brightway Insurance, an insurance agency in Jacksonville, Florida.

Transcript: A Florida Homeowner in Florida Property Insurance Meltdown

MANDY WELLS: Cape Coral is like copy-paste. It’s like the builders just went and built the same house over and over again.

MEGHNA CHAKRABARTI: Mandy Wells, her husband and son, moved to Cape Coral, Florida in 2017, and they live in one of those copy-paste houses. The three-bedroom, two-bath, 1,600-square-foot home was modern and in great shape until October 2019, when Mandy noticed the roof was leaking. Not good.

However, Mandy remembered seeing an ad for roofing on Facebook. It was from Marlin Construction Group based in Fort Myers, and their website says they are licensed and insured and a red banner on the top of the house, the Marlin Construction Group site says, your satisfaction is our #1 priority. 1. So Mandy called them.

WELLS: He comes. He asks me to sign a document called a proposal contract. And then it also writes on the back of my directory to pay for the authorization that I have leaking on the front. He tells me a storm date, which is different from the date we are meeting and even different from the date I had seen the water.

And he says to me: Oh, that’s from the strong winds. Everything is like strong winds down here. So then he sits next to me at the computer and helps me file an insurance claim.

CHAKRABARTI: By the way, the contractor hadn’t even been on the roof to inspect it, but he puts December 20, 2018, in the documents, the exact same day that the severe weather and wind hit Florida. But that was over a year before Mandy had any problems with the roof.

And by the way, the proposal contract that Mandy gave us has both the Angie’s List logo and the Better Business Bureau A-plus rating logo in the upper right corner. But Mandy, of course, wasn’t feeling like she was getting that A-plus service. So she spends the next few weeks going back and forth with this company, trying to sort it all out.

WELLS: And this company never came back to do the work. They tried to use this document to get me to sign an authorization and assignment of benefits. That was not until February 2020 when I simply asked them to cancel my file. No work was done in my house. The company was not even under my roof. My house had water all the time.

CHAKRABARTI: Assignment of benefits, also known as AOB. It is very common in property insurance lawsuits in Florida. And here’s how it works. A contractor or attorney asks the homeowner to sign off on their property insurance policy. So any money collected on an insurance claim goes directly to the attorney or contractor, not the policyholder. It’s common and it’s legal. But here comes your plot twist.

In Florida, attorneys often sue insurance companies for much more than the actual repair costs. And because of that AOB, they have to collect the extra money. In fact, as of 2013, insurance companies made $15 billion in payments in Florida, but less than 10% of that went to policyholders. More than 70% of them went to lawyers. Additionally, the Sunshine State is a prominent place nationwide. More than 75%, three-quarters of all property insurance litigation cases nationwide originate in Florida.

WELLS: Construction firms are being helped by lawyers and tying everyone up in litigation. I can promise you that the home owner has no idea what they are getting into. They think, you know, this is the way to, you know, I’m going to save my house. I will have a healthy place to live. You know, now I have mold in my house. I have water stains on my ceilings.

CHAKRABARTI: This is Mandy Wells in Cape Coral again. It took more than two years of legal battles with Marlin Construction Group and its insurance company. But Mandy will finally get her roof fixed in a few weeks. Meanwhile, her insurance premium has increased. A lot.

WELLS: It went from $800 a year to $2,700 a year.

CHAKRABARTI: More than tripled since 2017. All the while, Mandy’s coverage has dropped. And on top of that, her current insurance sent her a non-renewal letter for next year, meaning she has until next month to find a new policy.

WELLS: Before, I probably had, like, three or four companies to choose from. There was a company to choose from. That was it. But, you know, it’s like paying for gas. You just put the card in the machine and look away and just do it, you know? So … the sting is over.

CHAKRABARTI: But if insurance premiums keep going up the way they are, Mandy doesn’t know how much she can afford that sting.

WELLS: If it’s going to triple every two years, I mean, we’re basically almost a single-income family. Because I am a stay at home mom with my special needs son who I homeschool. We should consider making some kind of change.

I don’t know how much longer we could afford to stay at home. I think maybe I’m just tidying up the house for someone else to move into. It’s just incredible. It is unbelievable what is happening. It’s unbelievable that Tallahassee can’t do more for homeowners because that’s who we are. … We are losing. We are losing.

Transcript: How Florida Property Insurance Crisis Affects Insurance Brokers

MEGHNA CHAKRABARTI: Joe Carlucci and his brother Matt own Brightway Insurance, a brokerage in Jacksonville. And they opened in 2013 and have been through some ups and downs in the market. But they have never seen anything like it.

JOE CARLUCCI: We’ve never seen just the catastrophic event that it is now. I mean, we’re getting hundreds of calls and emails about rate hikes, non-renewals, companies going out of business. So it’s really kind of a scramble to try to keep people covered.

CHAKRABARTI: I talked about them doubling and tripling premiums, but the biggest issue, Joe says, is finding insurers who are willing to take on new customers even now.

CARLUCCI: We’re seeing very strict guidelines like we’re not going to take a roof that’s over ten years old. This is almost becoming the norm. And it used to be 20. So that’s crazy. It’s really hard for people to replace a roof that’s ten years old and in great shape.

CHAKRABARTI: And Joe told us that some companies won’t insure customers whose homes were built before 2010, which, as you can imagine, eliminates a lot of homeowners. And as a result, Joe has few options for people, making his job very difficult.

CARLUCCI: Whereas three years ago we were giving people like three or four options. We’re like, Hey, company A is $1,000 a year, company B is $1,500, but there are few better companies. You know, people want to see what the options are. And at the moment there is simply no option. It’s like, hey, here’s your policy, here’s your quote that you have to have at the end of the day.

CHAKRABARTI: So what that means is that a lot of people end up going to another country. Because brokers like Joe Carlucci can’t find them an affordable policy. And that place is Florida’s state insurance company. So here’s Barry Gilway, CEO and president of Citizens Property Insurance Corporation, the state’s insurance option.

BARRY GILWAY: I would say very, very few other companies are writing business. And, you know, we’re the only place those insurers can go. We are, frankly, for those insurers, we’re really the last resort, but we’re becoming the only option.

CHAKRABARTI: Well, for Joe Carlucci and other insurance agents like him, however, for anyone who goes to Citizens Property Insurance, that means he loses out on commission.

CARLUCCI: It’s not really benefiting the agents. It’s not really benefiting the customers. It’s not really benefiting the insurance companies. So, you know, I mean, I think the people who are getting paid for the claims. So I think that, you know, roofers are definitely making a living right now.

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