It feels like we’ve scaled a mountain. An insurance mountain; one with icy cold rate increases, dangerous crevasses of reduced coverage, and the claims yeti. Despite it all, we may be near the summit. I’m not saying the view from the summit will be worth the trek, probably the opposite. But I hope by reaching the summit after all the ascending perils, we can start our descent back to some sense of stability
Senate Bill 2A is the state’s response to the disastrous insurance marketplace that has fallen on Florida over the last two years. How will this bill save you money? The bill is NOT a check to policyholders and it is not a fine against insurance companies. It is a fundamental shift in how insurance will be transacted in the state, designed to boost confidence for insurance providers who in turn should provide free-market competition in the long run. SB 2A is not a band-aid, it’s a vaccine.
The bill covers 6 main parts:
1. Reinsurance – impact around 1 year
The changes here are meant to give alternate means to keep insurance companies solvent. By creating a state-backed reinsurance program insurance companies now have an added backstop to keep them operating. This should boost confidence from insurance companies operating in the low-rate marketplace on thin margins and encourage new entrants. More competition should in time lead to lower prices for home insurance in Florida.
2. Claims deadline – impact 1 year or more
This one tightens the time allowed to file a claim from the date the event happened from two years to one. This is the most direct limitation of coverage on policyholders in the legislation. It will take time for the insurance companies to see actuarial evidence it saves money, but the thought alone should incentivize rate stabilization. It does however come at a cost, one that requires policyholders to be sharper and quicker with filing claims.
3. Payment duties – impact immediate
This offsets what is lost from the claims deadline reduction by also forcing insurance companies to investigate and pay claims quicker, nearly twice as fast. The hope here is that quicker response leads to happier customers and less litigation, which in turn should result in overall lower expenses for insurance companies. This is the closest the legislation gets to putting money in people’s pockets
4. Attorney’s fees – impact 1 year or more
There is no denying attorneys perform an important role in ensuring fairness in the insurance marketplace. There have been numerous articles written recently about the impact attorney’s fees have had on the Florida insurance market specifically though and it was something that had to be addressed. This reform is meant to discourage frivolous suits, embellished expenses, and needless litigation, allowing for other much cheaper methods of claims dispute such as arbitration or mediation. If insurance companies get the cost relief they hope for, we could see significant rate reductions over the next few years as a result of this section of SB 2A.
5. Assignment of Benefits – immediate impact
Long a thorn in the side of insurance company balance sheets, prohibiting AOB will be an instant simplification of claims processing for insurance companies and hopefully bring quick rate relief. This seems meant mostly to clean up some dishonest contracting that has been happening around the state, driving up costs to repair and increasing claims expenses that don’t benefit the policyholder.
6. Citizens reform – impact immediate
The biggest thing here is requiring flood insurance. It will make a huge difference to a select number of people in the short-term and a smaller difference to every Citizens policy holder over the next 5 years. With nearly a million policyholders, SB 2A will bring many more clients into the flood insurance marketplace. If your property is insured with Citizens and in a flood zone, this could come as soon as summer 2023.
The overall intent of the legislation seems to be bringing confidence back into the insurance marketplace in Florida. It's a remarkably sensible long-term solution to a problem that has been building for years. I think of it like sending an advance party further up the mountain with supplies they can leave for us. So by the time we get there, we can fuel-up and keep going, increasing our chance of surviving the full journey. With these changes we may just see the summit after all, as long as the claims yeti stays away.
The views expressed in this blog are those of the author and should not be construed as advice or fact.