Get used to the idea that more South Florida homeowners will be forced back to state-run Citizens Property Insurance Corp., the so-called insurer of last resort.
That’s the message members of the Professional Insurance Agents of Florida are hearing at the Rosen Plaza Hotel in Orlando this week their annual “Agent Expo.”
Prospects for a legislative solution to costly claims abuses in South Florida are dimming again this year with just two weeks left in this year’s session.
If the Legislature fails to address “assignment of benefits” abuses for a fifth-straight year, more private insurers will likely decide parts or all of the tricounty region are too risky and refuse to take new customers, said Corey G. Mathews, CEO and executive vice president of the insurance agents’ trade group.
“Unfortunately, from what we’re hearing, it’s already happening,” Mathews said in an interview Friday. “I’m hearing from agents who say they submitted [a new policy] in a zip code they wrote [a policy in] last week, and the insurer is saying ‘Sorry, we’re closed in that zip code.’”
Citizens spokesman Michael Peltier said the company expects to grow by about 50,000 in coming months — a sharp reversal from the previous five years in which about a million policies were absorbed into the private market. Most of those policies will be in South Florida, he said.
Last year, Heritage Property & Casualty Insurance stopped writing new policies in Miami-Dade, Broward and Palm Beach counties, then later resumed writing to a “very select” number of homeowners through a small number of agents.
In December, Citizens released a report quoting United Property & Casualty president John Forney as saying his company stopped writing new business in Miami-Dade and Broward because claims had become far more costly there than in the rest of the state.
Citizens and other insurers have been asking the Legislature to help stem a flood of lawsuits generated by South Florida water damage restoration companies and about a dozen law firms. They say the contractors convince policyholders to sign over benefits of their policies, then quickly file suit if insurers refuse to pay inflated claims.
Attorneys are motivated by a law that shields policyholders from paying their insurer’s legal fees if they sue a company in a claim dispute and lose, but lets them collect legal fees if the insurer loses or agrees to pay more than originally offered.
Contractors have learned to secure an assignment of benefits to assert the same right, and that encourages them to file large numbers of suits with little risk, insurers say.
This year, insurers backed a legislative bill that would bar contractors from collecting legal fees if working under an assignment, but the chair of the Senate’s Banking and Insurance Committee refused to bring it up for debate.
A House bill that would award fees under a complicated formula was advanced this week but faces poor prospects of enactment with so little time left in the session.
Citizens was created to ensure Florida homeowners could buy insurance after a series of hurricanes prompted large national carriers to stop writing new policies in the state.
By 2012, Citizens’ policy count had swelled to 1.5 million. But the creation of new private companies, a 10-year hurricane drought, and a state-mandated “depopulation” program incentivizing private companies to absorb Citizens policies, has reduced its policy count to 450,000.
In recent months, Citizens officials have been warning the company will be “repopulated” if the Legislature doesn’t act to curb claims abuses.
As the insurer of last resort, state law requires Citizens to accept property owners who cannot otherwise get insured. State law also limits annual rate increases to 10 percent, which Citizens president and CEO Barry Gilway has warned might be necessary for the foreseeable future.
The Citizens workshop at next week’s Agent Expo will be moderated by Carl Rockman, Citizens’ director of agent services. According to an email flier sent to Professional Insurance Agents of Florida, the session will cover changes that Citizens has implemented “since you last wrote a substantial number of policies with them.”
“We all know that writing Citizens [policies] is the last thing any of us want to do, but until and unless something changes, we have to get used to the idea, and more importantly, prepared for the reality,” the flier said.