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What is going on in the Florida Insurance Industry?

If your home insurance has not canceled or increased this year — brace yourself. Currently, the insurance industry is facing the hardest market it has ever seen. These hardships can be primarily blamed on five factors: roof (and water restoration) fraud, increase in attorney involvement, inflation, reinsurance, and natural disasters.

The first two, fraud and lawsuits, have crippled the insurance industry. According to National Association of Insurance Commissioners (NAIC) data mined by the Florida Office of Insurance Regulation, while Florida homeowners insurance claims accounted for just over 8% of all homeowners claims opened by U.S. insurers in 2019, homeowners insurance lawsuits in Florida accounted for more than 76% of all litigation against insurers nationwide. Currently, the rate at which suits enter the door of an insurance agency are at an all time high. To support this statement, Lyle Adriano from the Insurance Business Magazine states, “In a report for the claims committee of its board of governors, the company said that for the first four months of 2022, it was served 3,881 lawsuits. Citizens averaged 970 lawsuits a month for the first four months of 2022 – 11.5% more than the average of 870 lawsuits a month for the same period in 2021.”

We cannot talk about the increase of attorney involvement without mentioning the influx of roofing fraud in Florida. Did your neighbor recently get a “free” roof from his insurance agency? Did you know you helped pay for that roof? If a roofer has recently solicited a complimentary roof inspection to you, you may be the next target of this fraud. Roofers have been relentless in their pursuit of filing fraudulent claims with consumers’ insurance policies. When you accept the offer of a free inspection, oftentimes, the roofer will prompt you to sign a stack of forms. Included in these is one called an “AOB” or assignment of benefits. Once signed, you have relinquished the rights of your insurance policy to the roofing company. Meaning: by law, your insurance company may no longer discuss your policy with you.

Not to mention, within the fine print of the document you’ve signed, you are obligated to pay any fees that your insurance company will not. In some cases, these fees can be upward of $10,000 and there is nothing you can do, but pay the fees or hire a lawyer to fight an already lost battle in court.

Similarly, the roofing company will contact your insurance company to file a claim for damage to your roof. This claim will request for the “damaged” roof to be fully replaced at the cost of the insurance company. Regularly, the damage to the roof is recognized as “normal wear and tear” which is not covered by any insurance policy. When the insurance company declines the claim, they are faced with a letter from an attorney suing the carrier for denying the claim. The insurance company is faced with two options: fight the claim in court and spend $20,000 in attorney and court fees or pay the roofing company $20,000 to replace the roof. Either way, the insurance company must forfeit $20,000. This is fraud. The recurrence of this scenario is one of the main reasons for the crippling state of the insurance industry in Florida.

In addition to the deadly combination of roof fraud and attorney involvement, you have suits from auto accidents or really, any accident. Have you noticed the propaganda, “David Newton won me $500,000” flooding our daily advertisements. You cannot turn on the TV or drive down the highway without seeing something of this effect. In 2022, an accident can be compared to winning the lottery.

To add to the effects of increase in fraud and attorney involvement, you have inflation. From materials, including all of the high tech computers in newer vehicles, to the maintenance employee working on your vehicle or home — everything has become more expensive. And guess who is footing the bill? You, the consumer.

At this point in our article, you may be thinking “insurance is a scam” or “how much is the insurance company making.” Here are the facts, Florida is the most regulated state when it comes to insurance. Legally, an insurance company cannot profit more than 3% on a policy. If a carrier has exceeded this profit margin, by law they are required to refund the difference to the consumer. This year, six of the largest insurance carriers in the state are filing for bankruptcy because they have no more money left to pay for these claims. This is why you do not see large, national carriers like Allstate, Geico, or Nationwide entering the Florida home insurance market.

In addition to the regulations Florida faces, Florida’s home insurance industry is fully reliant on reinsurance. Reinsurance is an unregulated, off-shore market that funds insurance carriers across the world. Think of it as the insurance for insurance companies. Taking this into consideration, when there are fires in California, hail storms in Texas, tornados in the midwest, or even tsunamis in Asia — reinsurance is the one that pays the claims. As a result, they must raise their prices to be able to afford the risk they take on.

We know how frustrating these times are for you as the consumer, but can help. We represent a majority of the insurance carriers in Florida. We will automatically shop your insurance policy and find you the best coverage at the best price. If you are already in the best place, we will tell you to stay there. As an insurance agency, we work for our clients, not for an insurance company. We want to help you protect what matters most. Call or text us at 386-673-5550.

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