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Overcoming the Ian Insurance Crisis: The Path to Recovery

The whole estimated insured losses from Hurricane Ian are $17.27 billion. Nevertheless, Ian didn’t put our insurance industry in crisis. The Category 5 storm that hit Southwest Florida one yr ago and cut a swath of destruction across the state just exacerbated it. The actual causes were years within the making and include excessive lawsuits; the fee of reinsurance, which is the insurance that insurance firms depend on to back them up in case of excessive claims; risk from climate change; inflation; the high cost of labor and materials to switch and repair homes; supply chain woes and others. But experts differ on what the principal culprits are and the way much they contribute to the crisis.

FRIEDLANDER
“It’s a really treacherous marketplace here in Florida for each consumers and insurers,” said Mark Friedlander, a spokesman for the industry association Insurance Information Institute. “Florida still stands out for being within the worst overall condition of a market at once.”

Meanwhile, homeowners still recovering from Ian have endured an achingly very long time to receive reimbursement on their claims, exhausted from the various hoops to leap through, the seemingly limitless paperwork they need to provide, delays to find contractors and the materials to do the work to rebuild. On the primary anniversary of Hurricane Ian, the sight of blue tarps still intermittently dotting the landscape are like a poorly put together patchwork quilt of loss, uncertainty, and want.

There have been 521,819 residential property claims for Ian, in response to information reported by insurers to the Florida Office of Insurance Regulation, which has primary responsibility for regulation, compliance, and enforcement of laws related to the insurance business and monitors statewide industry markets. Lee County was No. 1, with 262,865 claims, or simply over half. Charlotte County had 103,654 claims. Collier County had 44,047 claims.

BIRNBAUM
“The crisis is actually a crisis of affordability and availability,” said Birny Birnbaum, executive director of the patron advocacy nonprofit Center for Economic Justice. Birnbaum is a national expert who previously served as chief economist on the Texas Department of Insurance and a member of the patron board of trustees of the National Association of Insurance Commissioners. Homeowners are left with “Swiss cheese” policies, hollowed out with exclusions for wind and flood, while premiums skyrocket for a product providing less and fewer coverage for increasingly more money, Birnbaum said. People buying a property are making a long-term investment, he said. When an organization offers coverage, an individual has reason to consider the corporate understands the danger and is in there for the long haul for them, Birnbaum said. “What we discover out will not be in any respect. The corporate that wrote the danger doesn’t want the danger.”

Contractor Marc Arnett, CEO of Sunset Builders & Maintenance in Fort Myers, says he has worked for 50 or 60 customers within the wake of Ian, including his parents. “I feel there just must be a little bit more transparency between insurance firms and folks they serve,” he said. He’s seen the backwards and forwards between homeowners and insurance on claims estimates, the delays and requests for increasingly more paperwork. “They need monthly premiums paid in a timely fashion, but the shopper can wait five to 10 months,” he said of insurers. His parents live in Fort Myers, lost their pool cage, and needed some significant paint and remodeling work. He did the job in November. His parents didn’t get final reimbursement from their insurance company until June, Arnett said. “I can let you know insurance has been an absolute nightmare,” said Char Seuffert, an actual estate broker who owns RE/MAX Sunshine realty on Pine Island. “I feel persons are re-traumatized. They’ll’t sell their homes, they’ll’t buy a house. They’re fighting the insurance company and it may well take two years to settle a claim,” she said. “The house is held hostage. They’re held hostage. It’s a nightmare on every level.”

She has seen clients who aren’t willing to purchase due to the high cost of insurance. It’s more of a priority than the high rates of interest, she said. “It’s absolutely affecting the power to shut homes.”

SEUFFERT
She will see the problem from either side because her husband, Eric, owns Brightway Insurance, a Seuffert Agency, in Cape Coral. “We’re there to assist clients, not hurt them,” she said. “It’s hard to look at, hard to see people’s mental state, since it’s bad.”

Insurance reform
The Florida Legislature and Gov. Ron DeSantis have been scrambling to get the insurance crisis under control. The brand new laws crafted in two special sessions held by the Legislature in 2022 and three latest bills passed in legislative session 2023 are positive steps, but how great the impact will probably be and the way quickly it should be realized is uncertain. “Let’s put it this manner. If the laws that were passed in those sessions didn’t occur, we could have just about lost your entire regional insurance market here in Florida,” Friedlander said. “It might have been a whole collapse of what’s roughly 80% of all of the writing in Florida, 80% of all property insurance, as written by the small regional firms,” he said. “We were heading in that direction. That’s how bad things got.”

Homeowners in Florida are paying annual premiums which are three to 4 times higher than the national average, in response to experts. What that average is appears to rely on whom you ask. The Insurance Information Institute estimates a mean premium of $6,000 per yr vs. a national average of $1,700. Insurify, an insurance comparison website, has two figures for average insurance premiums for Florida in its 2023 study “Insuring the American Homeowner.” One is $7,788. In one other a part of the study, the common premium is listed at $4,416 per yr, based on 2022 rates. Tanveen Vohra, communications manager for Insurify, explained the apparent discrepancy by saying Insurify found average prices were closer to $2,000 to $3,000 per yr or less within the northern, inland parts of Florida, while “prices could skyrocket to greater than $10,000 per yr in southern coastal cities like Miami. This state average reflects the incontrovertible fact that an enormous portion of the state’s residents live in these southern coastal areas that see incredibly high average home insurance premiums.” The opposite $4,416 figure is from a previous study Insurify did earlier this yr and is a mean from across the state, no matter population distribution, she said. “Every organization has other ways to calculate premiums,” Friedlander said. “So there’s not necessarily a right or mistaken answer.” But in response to the institute’s research, premiums are 102% higher over the past three years cumulatively, he said.

In response to the State Office of Insurance Regulation’s July 2023 Property Insurance Stability report, average insurance premiums for homes in Florida’s 67 counties range from $1,651 in Sumter County to $7,584 in Monroe County. Lee had a mean homeowner’s premium of $3,021; Charlotte had a mean of $2,619; and Collier a mean of $4,610. Palm Beach County is $5,710, No. 2 within the state.

“We’ve had two manmade aspects which have driven the Florida property insurance market right into a crisis situation,” Friedlander said. “And that is over the course of a few years. It was primarily legal system abuse and claim fraud.” State Office of Insurance Regulation statistics show that in 2021, Florida had 7% of house owners’ insurance claims opened nationwide, but 76% of lawsuits. “That just shows you we now have an issue,” Friedlander said. “Let’s just look back a yr. In 2022, we had six Florida residential insurers be declared insolvent, and that was all before the hurricane,” he said. People were saying “Well, Florida has plenty of hurricane damage. They need to put firms out of business,” he said. “Well, no, that’s not why.” They were all “litigated out of business,” Friedlander said. “That’s how we label it. They were all hit with literally 1000’s of lawsuits and being smaller regional firms that only operate primarily in Florida, they didn’t have the capital position to face up to those sort of heavy expenses, you realize, meaning legal defense costs.”

Claim fraud
Much of the litigation is driven by the claim fraud, he said. “They work hand in hand. For instance, we’ve had roof substitute fraud schemes for a few years in Florida, where unscrupulous contractors go door to door in neighborhoods across the state, indicating that there’s been storm damage when there really hasn’t.” They talk homeowners into replacing the roof, promising them a free roof and the homeowner signs over their insurance claim, which is named task of advantages, he said. Again and again the contractor will send the bill to the insurance company and it’s rejected since it’s a fraudulent claim with excessive costs, he said. “And when these get rejected, they sue. And even when they might not have a legitimate lawsuit, sometimes in lots of cases it’s inexpensive to settle that dispute than to go to court,” he said. Birnbaum disputes the excessive litigation theory…

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