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Nestled between the glistening Gulf of Mexico and the vast Atlantic Ocean, Florida stands as a picturesque paradise. Yet, beneath its sun-kissed surface lies a complex and often tumultuous landscape: the state's homeowners insurance industry. 

It’s no secret that Florida's unique geography, prone to hurricanes, floods, and other natural disasters, poses constant challenges to insurers and homeowners alike. As premiums soar and coverage options dwindle, residents often find themselves grappling with the ever-shifting tides of affordability and protection.

But that’s only part of the story.

For years, laws intended to protect homeowners from unscrupulous insurance practices have been exploited, resulting in a tsunami of lawsuits that were costing the industry millions of dollars. Among these laws was the “assignment of benefits,” or AOB, which allowed homeowners to transfer their claims to contractors, who, in turn, initiated lawsuits and gouged insurers for triple what insurance claims are actually worth.

For context, data from the Insurance Information Institute shows that in the year 2000, Florida had approximately 1,300 AOB lawsuits. Just three years later, this figure skyrocketed to 79,000. By 2018, the number surged to roughly 135,000 AOB lawsuits—a remarkable 70% rise within a mere 15-year span.

In a bid to curb costly and abusive litigation and therefore reduce premiums for homeowners, Senate Bill 2-A was enacted into law in December 2022. This legislation abolished AOB contracts and restricted the right to one-way attorney fees in residential and commercial lawsuits. These measures, alongside others, were celebrated for their potential to restore Florida's home insurance market to a more robust and sustainable market.

Yet, as we pass the one-year anniversary of the new legislation, some argue that not much has changed.

While the number of AOB lawsuits has dropped, fraudulent claims are still common. As of the fourth quarter of 2023, the industry remained in a loss position, even without a recent hurricane.

The skeptics are alive and well. However, perhaps many of them forget about the underlying factors.

This HoneyQuote analysis aims to unveil those factors while highlighting some positive trends that are painting a brighter future for the Florida home insurance industry. Our findings indicate that although progress is being made, there is still considerable potential for further improvement.

For years, Florida has accounted for a large part of the nation's homeowners insurance lawsuits, while making up only a fraction of the nation's actual homeowners insurance claims.

The chart above illustrates the historical inconsistency between claims and lawsuits in Florida, which is an indicator of fraud. Notably, there was a surge in lawsuits in 2018, coinciding with an overall decrease in claims compared to the preceding year. Even as claims fell, the lawsuit trend continued. 

Another study commissioned by the Governor, known as The Florida Property Claims and Litigation Report (PCLR), unveiled concerning trends in 2022. The report highlighted a disproportionately high number of lawsuits originating from Miami-Dade, Broward, and Palm Beach counties, with these claims averaging six times the cost of non-litigated claims, again suggesting instances of abuse and fraud.

The chart above indicates a significant discrepancy in litigated claims between different counties in Florida. Notably, Palm Beach, Broward, and Miami-Dade counties had a notably higher rate, reaching 27.5% compared to the statewide average of 9.8%. Seminole, Orange, Lake, and Osceola counties demonstrated trends similar to the statewide average, while all other counties reported lower rates.

However, several carriers are starting to report positive claims trends across the board. 

In its fourth quarter 2023 results, Universal Insurance Holdings noted a reduction in total claims, represented claims, assigned claims, and daily claims. 

Citizens Property Insurance Corporation observed a 25% reduction in litigation compared to the previous year, according to former CEO Barry Gilway. Gilway noted to HoneyQuote a significant decrease in pending litigation cases, from over 20,000 to less than 17,000, attributing this progress to a high closing ratio and a decrease in litigation instances.

This trend appears to be consistent across the industry. 

Full-year 2023 results indicate a decline in direct incurred defense expenses, totaling $739 million, marking the lowest yearly total since 2019 when expenses amounted to $637 million, as reported by S&P Global Market Intelligence. This significant reduction from the $1.6 billion incurred in 2022, heavily impacted by Hurricane Ian, signals a promising trajectory for the Florida insurance landscape.

And it’s not just the carriers who are seeing a positive impact. Jeremiah Perez, owner of Absolute Choice Insurance in Miami, told HoneyQuote that his agency has seen a 70% reduction in third-party claim frequency.

“Although the potholes on the road from the AOB abuse have been repaired, there's still a bumpy road ahead due to the damage caused. The industry has quickly seen a significant reduction in litigated claims because of the legislative changes for the betterment of Floridians,” he said. 

“Our insureds have shown an increase in seeking better guidance directly from their trusted agent at the time of a loss. Nevertheless, it is still too soon to truly determine the long-term benefit that the AOB reform will have within the industry. Now is the time for our industry to stand strong with our promise to restructure the property as it was before any covered loss.”

Still, a number of challenges persist, Gilway said.

“I believe that the combination of AOB and, more importantly, the elimination of the one-way attorney fee statute are having a significant impact,” Gilway said. “But you still have to deal with inflationary issues and the continuing increase in fraud, which really continues to be out of control.” 

After many years of escalating premiums, eight Florida insurers have filed reductions to their rates for homeowners and condo policies across the state while 10 more companies have filed zero increases.

According to the May 2024 “Florida Property Insurance Market Update” from the Florida Office of Insurance Regulation, the recent rate filings are evidence that the market is finally stabilizing.

Earlier this month, Security First Insurance Company announced that for the first time in nine years, it will reduce its HO3 rates by 5.2% and HO4 rates by 5.9%. Both rate reductions will be effective at the end of August 2024. 

“The result of this legislation has been an improvement in the financial results for companies like mine and we’re happy to pass along the benefits to our customers in the form of reduced rates,” said Security First’s CEO Locke Burt. 

In April, Florida Peninsula Insurance Company announced a 2% reduction in rates. This decision, set to take effect on July 15 for new customers and August 1 for renewals, follows recent legislative changes and insights from the company’s analytics team, which identified avenues for passing on additional savings to policyholders, according to President Clint Strauch.

"This should come as great relief to many Florida homeowners who have been suffering through this insurance crisis," Strauch stated. "We are happy to be able to offer this reduction to Florida residents. The industry is showing indications of stabilization thanks to the hard work of our state legislators."

American Integrity announced a 6.9% reduction to their DP-3 rate, starting June 19 for new business and August 18 for renewals. Slide Insurance Company and Florida Family Insurance Company are each seeking a 0.5% decrease in their rates, which sounds small but does send a positive sign that the market is improving.

Overall, experts still expect premiums to rise, but at a slower rate than before.

It’s well known that Florida has the highest average property insurance premiums in the nation—$4,231 per year, nearly triple the national average, according to the Insurance Information Institute. 

Homeowners in Monroe, Broward, and Miami-Dade counties pay the highest average premiums in the state, some of them over $7,000 per year, according to the January 2023 Property Insurance Stability Report released by Florida's Office of Insurance Regulation. 

Thanks to inflation, that figure may climb higher as it becomes increasingly more expensive for insurers to cover claims.

According to the Chubb Market Trends 2023 report, the price of high-end appliances surged by 5% to 16% from 2021 to 2022. Additionally, the cost of building materials climbed higher, with copper electrical materials experiencing a 4% rise and plumbing materials soaring by as much as 35%. Moreover, labor costs have escalated across the construction profession.

Rising building materials only make natural disasters that much more expensive for insurers. 

Since 1980, Florida has had 84 weather or climate disasters that caused losses of over $1 billion each. These included droughts, floods, freezes, severe storms, hurricanes, wildfires and winter storms. The average number of events per year is 1.9. However, in the most recent five years, the annual average has surged to 4.8 events, according to the National Centers for Environmental Information. 

This figure is likely due to the escalating frequency, intensity, and scale of disasters. Notably, climate change has warmed oceans, consequently fueling more potent hurricanes, as suggested by research.

The high costs associated with rebuilding and labor are key factors contributing to the rising premiums for homeowners, compounded by losses incurred from Hurricane Ian and other weather events.

These are the reasons cited by two private carriers when they sought approval for premium hikes exceeding 50% earlier this year. Castle Key and Amica asked regulators to approve rate increases of 53% and 54% on some of their policies. 

 In June, the Citizens Property Insurance Corporation Board of Governors deliberated a statewide average rate increase of 14% for homeowners, condominium unit owners, dwellings, renters, and mobile home policies. 

Homeowner multiperil (HO-3) policy rates would increase by an average of 13.5%. Condominium owners would see an average 14.2% increase. If approved by the Office of Insurance Regulation (OIR), the rates would go into effect for renewal policies after January 1, 2025.

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Still, insurers and regulators believe that some of the reforms put in place last year will help slow the rise in insurance premium increases in the coming years.

“Premiums are still increasing, but at a significantly lower level,” said Gilway, former Citizens CEO. “While a few companies are still filing for increases in the 40–50% range, due to catch up and latent litigation development, most companies are limiting rate increases to inflationary increases of around 5%.

“Negative loss development is still occurring for the industry for IDA and prior hurricanes.”

Agency owner Perez also believes that the positive impact of the reforms will trickle down in time, noting how important education is now for his customers. 

“Property insurance premiums are still trending higher due to the infancy stage of the legislative changes. The law will need to reach maturity before consumers can see the true benefit,” he said. “It took almost 10 years to reach meaningful change within the legislative session, and with the bold legislative decision, a healthy Florida marketplace is on the horizon.

“Until then, my agency will continue to educate the consumer on how we arrived at such an abusive marketplace with high premiums and inadequate coverage. Educating the consumer is our industry's path to providing knowledge on the true purpose of an insurance policy.”

The Florida insurance industry, long beleaguered by underwriting losses and market instability, is finally seeing signs of recovery and optimism. 

Despite still recording an underwriting loss for the year 2023, the gap has significantly narrowed compared to previous years. Moreover, legislative reforms implemented in March 2023 are starting to show promise, offering a glimmer of hope for insurers grappling with a troubled market.

According to data from S&P Global Market Intelligence, there's been a notable turnaround in the financial performance of Florida's insurers. Out of the state's 22 largest private domestic residential property insurers, 18 posted profits in 2023, an increase from 10 in the prior year.

The collective net income for a group of approximately 50 insurers (excluding Citizens) amounted to $147.3 million, an improvement from the staggering net losses of over $1 billion in each of the previous two years.

While underwriting losses persist, totaling $190.8 million in 2023, it marks a considerable improvement compared to the substantial losses recorded in 2022 and 2021. This marks the eighth consecutive year of underwriting losses for Florida insurers, but the trajectory is promising, indicating a potential shift toward stability and profitability in the future.

The optimism among insurers is palpable, buoyed by the positive effects of recent legislative reforms. 

HCI Group, for instance, has seen significant achievements, including substantial growth in premiums-in-force, a reduction in the gross loss ratio, and the commencement of operations of a new insurance carrier. 

Heritage's strategic focus on achieving rate adequacy and diversifying its book of business has led to improved underwriting results, driving lower claims-related losses and managing reinsurance costs effectively.

"Our deliberate efforts over the past two years resulted in a better quality and more diversified book of business, which more effectively manages reinsurance costs and drives lower claims related losses. Our commitment to enhanced and long-term relationships with our reinsurers, who are pivotal to our success, has also been a key aspect of our strategy," said Ernie Garateix, CEO of Heritage. 

"These actions, the subsequent results, and our recent capital raise, position us well for selective growth going forward. As we look ahead, I am confident in our ability to maintain this momentum across our sixteen-state platform, driven by our solid foundation, strategic clarity, and the dedication of an experienced workforce."

Universal Insurance Holdings Inc. is particularly optimistic about the future, with CEO Stephen Donaghy hinting at possible future rate reductions in the Sunshine State. This sentiment underscores the positive developments spurred by the legislative reforms and the potential for a more stable and competitive insurance market in Florida.

“We closed out both the fourth quarter and full year with double-digit adjusted returns on common equity, and I believe that even stronger results are firmly in our future,” said Donaghy. “2023 was a transformative year for us, and our significant efforts position us for meaningful success in the new legislative environment.”

Overall, the recent improvements in the Florida insurance industry offer a glimmer of hope for insurers and policyholders alike. While challenges persist, the collective efforts of insurers and policymakers, coupled with strategic initiatives and a more favorable regulatory environment, are laying the groundwork for a brighter and more sustainable future for Florida's insurance market.

Florida's insurance landscape is undergoing a notable shift as eight new property and casualty insurers backed by industry veterans enter the market. These approvals coincide with recent legislative reforms designed to enhance market stability and expand choices for policyholders.

Ovation Home Insurance Exchange:

Launched by Windward Risk Managers, the company behind Florida Peninsula and Edison Insurance.

Manatee Insurance Exchange:

A spinoff from Tampa-based Safepoint Insurance Co.

Condo Owners Reciprocal Exchange and Tailrow Insurnace Companies:

Led by Paresh Patel, the CEO of HCI Group.

Orange Insurance Exchange:

Chairman Donald Matz spent 26 years at Tower Hill Insurance Group, and President of underwriting for Orange is Michael McNitt, the longtime head of Cabrillo Coastal.

Orion180 Select Insurance Company and Orion180 Insurance Company:

CEO Ken Gregg was previously with CNA Insurance and Allianz.

Mainsail Insurance Company:

A sister firm to Hippo Insurance and Spinnaker Insurance companies.

Insurance Commissioner Michael Yaworsky lauded the developments, stating, "Florida's insurance market continues to strengthen, showing signs recent legislation is having positive impacts on the property insurance market." 

He emphasized the Office of Insurance Regulation's (OIR) commitment to stabilizing the market through legislative reforms and attracting more insurers to the state. This push for competition ultimately benefits policyholders by offering them more choices and potentially lower premiums.

In addition to welcoming new entrants, OIR has approved the acquisition of Trusted Resource Underwriters Exchange, a Florida domestic property and casualty insurer. This move is poised to inject over $1.25 billion of capital into Florida's insurance market, signaling confidence in the state's regulatory environment and growth prospects.

Citizen’s Gilway told HoneyQuote that the influx of new insurers comes at a crucial time as Florida grapples with carrier insolvencies and the departure of some national companies from the state. 

“There have been 11 companies declaring insolvency, and even more important, several of the nation's companies have decided to leave the state,” he said. "However, there have also been 8 new companies approved, and they are taking advantage of the depopulation opportunity and new business picked up from companies that have left or are leaving the state.”

As the market continues to stabilize, OIR is seeing continued interest from insurers in the Citizens Depopulation Program. In 2024, OIR has approved 13 companies to assume more than 354,000 policies from Citizens. In 2023, more than 275,000 policies were assumed from Citizens, reducing Citizen’s exposure by more than $113 billion.

“Citizens, for example, has dropped from 1.42 million customers to 1.17 million customers, and additional depopulation requests have been approved over the next several months,” Gilway said. “The startups are making quite an impact by taking advantage of picking up the business dropped by many carriers, without the historical litigation attached and negative development.”

The newcomers are also welcomed by insurance agency owners like Perez, who highlighted to HoneyQuote the challenges caused by insolvencies. 

“Carrier insolvencies have caused a strain in our agency due to the labor intensity within a short period of time to meet the deadlines provided by the state,” he said. “Our agency relies on tools driven by technology to overcome the challenge.”

He adds that while competition is great for the consumer and provides a healthy marketplace, “not all capital is created equally.” 

“So, leadership must be evaluated to avoid short runs that lead to future failures,” he said.

As Florida's insurance market undergoes these transformative shifts, stakeholders remain cautiously optimistic about the future. 

While challenges persist, the influx of new insurers, coupled with legislative reforms and strategic acquisitions, bodes well for the long-term stability and competitiveness of the state's insurance sector. 

With continued vigilance and collaboration between regulators, insurers, and industry participants, Florida is poised to emerge stronger and more resilient in the face of evolving risks and market dynamics.