Florida Homeowners' Insurance Regulations
The homeowners' insurance market in Florida has been in a near-constant state of flux since 2005. New legislation was introduced each year as lawmakers tried to find the balance between consumer protection and sustainable premium rates for the insurance companies. Because of the severe risk Florida faces from hurricanes each year, the insurance market there faces financial problems and regulations shared by no other state.
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History
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The severe 2005 hurricane season brought consequences to Florida's homeowners' insurance market that are still being felt five years later. Insurance companies faced heavier than usual losses but were restrained by state legislation, preventing them from maintaining financial solvency and stability. Since 2005, many new laws have been passed, some in favor of insurers, and some in favor of consumers, but even still, many property insurers have left the state or are planning to do so shortly, according to the Palm Beach Post.
Florida Statutes
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As of June 2010, Florida had several laws regarding homeowners' insurance policies. Florida Statute 626.0654 requires insurers to offer credits for sprinkler systems. Statute 627.0629 calls for appropriate credits for hurricane shutters on a home. Policies must offer a minimum $500 wind/hurricane deductible, and commercial residential risks must be offered an optional 2 or 3 percent wind/hurricane deductible, according to Statute 627.701. Certain rating credits are required for policies that exclude wind as a cause of loss.
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2005 Legislation
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Immediately prior to the devastating 2005 hurricane season, Florida passed consumer protection laws that are still in force as of 2010. Insurers in Florida are prohibited from failing to renew policies for a minimum of 90 days after a home is completely rebuilt after hurricane damage. For replacement cost policies, insurers also must pay the full replacement cost for damaged property up front, as opposed to the traditional practice of settling with actual cash value first then paying the replacement cost balance later.
Rate Hikes
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Since 2005, Florida insurers have been required to hold a public hearing before raising premium rates by more than 15 percent. This has made it difficult for insurers to financially recover from the devastating 2005 hurricane season. In 2010, new legislation was proposed to make it easier for insurers to raise rates up to 10 percent. This law was passed by the state legislature but vetoed by governor Charlie Crist in early June 2010.
Solvency Regulations
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As of June 2010, Florida relaxed its regulations regarding the financial solvency of property insurers in the state. This was done because many insurers, unable to recover from the heavy losses of 2005, have fallen below acceptable solvency requirements. Legislative efforts to allow insurers to sufficiently raise rates to recover their losses have failed; in response, the solvency requirement was lowered. While this may allow some insurers to stay in business, it will not help them pay for potential large future losses.
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References
- Palm Beach Post: Florida Home Insurance Legislation Mainly Favors The Insurers
- Florida Office of Insurance Regulation: Common Questions That Must Be Addressed in Homeowners Rate/Rule Filings
- South Florida Business Journal: Florida Changes Hurricane Insurance Rules
- P&C National Underwriter: Crist Vetoes Florida Property Insurance Bill
- Open Market: FL Property Insurance Turning a Blind Eye is Not Reform
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