St. Petersburg Sen. Jeff Brandes believes the recently signed property insurance bill could mitigate many of Florida’s problems – if the Legislature passed it in 2019.
Brandes, long a vocal proponent for property insurance reform, led the calls for a special session to address the issue in April after lawmakers failed to agree on a bill during the regular session in March. The term-limited state senator got his wish as Gov. Ron DeSantis reconvened the Legislature and signed a new bill into law on May 26.
The governor called the bill “the most significant reforms to Florida’s homeowner’s insurance market in a generation” in a statement following the signing. However, many lawmakers from both sides of the aisle feel the legislation did not do enough to protect companies or lower premium costs.
“The problem is – and I said this during the debate – what we have, is Stage 4 cancer in the property insurance system,” Brandes told the Catalyst. “And we’re treating it with Stage 1 solutions.”
Brandes called the bill “too little, too late” and said it is not nearly enough to help the industry or consumers. He said the biggest challenge in Florida is fraudulent roof claims, and the solution is realigning incentives.
He said he pushed hard for companies to provide actual cash value rather than paying for the cost of a new roof. He explained that if someone totals their 2010 Toyota Corolla, their auto insurance does not offer the cash value of the latest model.
“If you have an insurance claim on a roof that’s 20 years old, the company will buy you a brand new roof, and many are forced to offer that kind of coverage,” said Brandes. “That changes the incentives.
“We would have a lot more car accidents, I guarantee, if your insurance company had to buy you a brand new car …”
WFLA reported that the same day the governor signed the reforms into law, Southern Fidelity Insurance Company notified agents it was suspending new business and renewals until they could ensure complete reinsurance coverage. Two other companies said they were limiting new business in the state last week.
Brandes said the incentive to file a claim and exchange an old roof for a new one is why Florida accounts for 80% of the nation’s property insurance litigation but only 8% of open claims.
The new bill moved quickly through the House and Senate with mostly bipartisan support. Lawmakers were anxious to get legislation – even as a first step – passed before the June 1 start of hurricane season. The new law creates a $2 billion Reinsurance to Assist Policyholders program to help companies mitigate risks.
The legislation also forbids companies from automatically denying coverage because of a roof’s age – if it is less than 15 years old. Brandes said that stipulation may seem consumer-friendly but will lead to insurers denying claims for other reasons.
“For example, age of home,” added Brandes. “That’s perfectly fine and completely allowed.”
Many companies, said Brandes, will have no choice but to find ways to reduce their exposure to litigation.
“If you squeeze a balloon on one end, the air is going to rush to the other.”
Brandes called the bill necessary to save some carriers but not sufficient. In the coming weeks, he expects more insurers to have their ratings withdrawn and potentially release 100,000 additional policies into the market just as hurricane season gets underway.
Other private companies cannot absorb that many policies, said Brandes. Many will go to Citizens – the state-backed insurer and typically a last resort for homeowners struggling to find coverage in the private marketplace.
Brandes noted that lawmakers avoided addressing concerns with the subsidized insurer, which projects to hold over a million policies by the end of the year. He believes Citizens could reach that milestone by the third quarter and said it is hard to steer homeowners out of Citizens because its rates are “generally half” the cost of a traditional market-based policy.
“Citizens only has $6 billion in reserves and yet has potentially $300 billion in liabilities,” said Brandes. “We would never let a regular insurance company grow as fast as Citizens is being forced to grow, because you can’t build reserves fast enough.”
Citizens’ exponential growth is a risk for every Floridian, said Brandes, because the lack of premiums to cover the risk exposure will affect the state’s bond rating. He added that Citizens’ rates are set politically rather than based on “actual rules.”
Brandes said that before 2006, the state required Citizens’ rates to remain competitive with the top 10 insurers in a region. He said people are now abusing the program, as a third of all the subsidized policies are for second homes.
“So, what ends up happening is, millionaires from New York can come down, buy a home in the Keys and get it subsidized by Citizens,” said Brandes. “And you and I get to pay the bill if they actually have a claim.”
The situation is so critical that the senator believes lawmakers could once again reconvene in Tallahassee in the coming months.
Brandes believes the governor will call another special session if insurers cancel 200,000 to 300,000 policies in the coming weeks, which “is not an unlikely possibility.” He said a named storm – or any storm, for that matter – is a reason for roofers and lawyers to coax homeowners into making a claim.
“They see it as they just found a pot of gold at the end of that tropical storm,” he said. “The Legislature did very little to slow down the amount of litigation.”
Brandes, term-limited in November, said he will attend every special session between now and election day. In the meantime, he is touring prisons and continuing to advocate for his other passion – criminal justice reform.
Brandes is still committed to starting a non-profit policy firm to continue working on issues close to his heart. That includes transportation and affordable housing, in addition to property insurance and criminal justice reform. He said he does not want to leave the work unfinished, and looks forward to sharing the knowledge acquired over his 12 years in office.
“I’ve worked really hard over the last decade to learn this stuff and to become an expert in these topics – or at least as expert as I can be,” said Brandes. “And so, I want to continue to work on that and educators.”