Big Changes Are Coming To Homeowners Insurance In Florida

Starting July 1, it will be harder to take insurers to court in Florida, and there will be new limits on what companies will pay for roof damage.

Policyholders with state-owned Citizens Property Insurance will see their rates go up.

The changes come from a bill Gov. Ron DeSantis signed into law earlier this month. The idea is to control costs, in the hopes of bringing more insurers into Florida. But will it work?

WUSF's Bradley George spoke with Patricia Born, who teaches in the Risk Management and Insurance program at Florida State University's College of Business. Below is an edited transcript of their conversation.

Why did lawmakers make these changes?

Part of the issue with homeowners in Florida is catastrophes are changing. It's getting expensive to insure homes against catastrophic damages. But on the other hand, there's also the cost of doing business where insurance companies are having to spend a lot more money on defending claims, investigating potential fraudulent claims, or defending themselves against frivolous or illegitimate claims. And because they're spending that extra money on that type of activity, they've got to recoup that somewhere. So, it's also adding to the cost of the homeowner’s coverage.

What changes will homeowners see in their policies, once this bill becomes law?

What homeowners should see is potentially an increasing number of homeowners insurance companies in Florida or options for being able to shop around a little bit more for coverage. The legislation is going to make the environment a little bit less uncertain with respect to some of those costs, whether it's cutting down a little bit more on fraud, reducing the incentives for lawyers to bring suits. Maybe insurers that have decided not to operate in Florida for a while will come back. The big hope is that we get a more vibrant private insurance market, where insurers are comfortable with estimating what the cost of doing business in Florida looks like.

You mentioned private insurance. And in Florida, we have a public option for homeowners, Citizens Property Insurance, which is kind of an insurer of last resort. What's changing for people who have policies with Citizens?

The [premiums] will increase at a faster rate than the current path, which allowed Citizens to raise rates 10% per year. The new law is going to allow them to raise 11%, then 12% the following year. What that's going to do is push people out of Citizens to go shopping in the private market. An the hope there is that there are options in the private market for the population of Florida so that they don't have to be in this insurer of last resort.

So, with potentially a more vibrant private insurance market in Florida, does that mean homeowners could perhaps see decreases in their premiums if they have more options and there's more competition among insurers?

I would like to think so. It's not going to be something that happens right away. But it depends on whether insurers do see this cost of doing business in Florida falling. But if insurers can control the costs of providing the coverage and address how much they're spending on fraudulent claims, then we should see the prices go down for consumers.

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