March 24 will mark two years since Republican Florida Governor Ron DeSantis signed tort reform measures into legislation. HB 837 took direct intention at an epidemic of litigation, the issue most chargeable for steep will increase in householders’ insurance coverage charges and the failure of some Florida insurers. One statistic is sufficient to inform the story: though Florida is dwelling to solely eight p.c of the nation’s householders’ insurance coverage claims, previous to the reforms it was dwelling to 76 p.c of your complete nation’s householders’ insurance coverage lawsuits, in response to Mark Wilson, president and CEO of the Florida Chamber of Commerce.
The influence of HB 837 and different tort reform measures handed by the Florida legislature is already being felt. Frivolous litigation is down double-digits, insurance coverage charges are declining, and ten new firms have entered the Florida market, inspired by the improved local weather for insurance coverage consumers and suppliers. The information and knowledge are compelling – out-of-control litigation is down by greater than 40 p.c, householders’ insurance coverage charges are down a median 5.6 p.c statewide, and greater than ten new insurers had been authorised to enter the market. There may be even a deliberate IPO of a Florida insurer, Slide. These developments symbolize a sea change from greater than 2 years in the past, when the Florida insurance coverage market was on life help.
There was a kerfuffle prior to now week within the Florida legislature surrounding current newspaper articles on the state’s insurance coverage market. The articles and their supply are so deceptive that we felt compelled to set the story straight.
The article that has fanned flames from the dying embers of householders’ insurance coverage lawsuits is Miami Herald’s ‘Secret examine discovered Florida insurers despatched billions to associates whereas crying poor,’ and the associated Tampa Bay Occasions‘ ‘Florida Insurance coverage Firms Steered Cash to Buyers Whereas Claiming Losses, examine says.’ The primary thrust of the articles is that managing basic brokers (MGAs) wholly owned by insurance coverage firms are making “billions of {dollars}” because of the connection between affiliated MGAs and the insurance coverage firms they serve.
Within the insurance coverage context, MGAs are brokers that perform agreed features on behalf of insurance coverage firms. These might embody the sourcing of enterprise by means of relationships with retail brokers, underwriting, coverage issuance, collections, and claims adjusting. Briefly, MGAs carry out a number of duties for insurers, in accordance with an MGA settlement, and are paid for his or her companies by the insurer as a share of premium, simply as unbiased brokers are. Some insurers, and most Florida insurers, function with 100%-owned MGAs. A current white paper goes into better element on how MGAs function and their worth within the Florida market.
Fifteen years in the past there have been some Florida insurance coverage firm failures the place there was alleged overfeeding of affiliated MGAs. The Florida Workplace of Insurance coverage Regulation, then headed by Commissioner Kevin McCarty, took motion towards Florida insurers that diverted extreme capital to their affiliated MGAs. Right this moment’s Florida insurance coverage market is far stronger than the market of 2010, as is insurance coverage regulation and threat administration, a marked enchancment from an earlier period when the bevy of Florida-focused firms was extra thinly capitalized and extra extremely leveraged.
The articles suggest that there’s something insidious or secretive about MGA relationships and the true monetary efficiency of Florida insurers. The articles’ supply report feedback on the 2017 – 2019 interval, throughout which there have been sturdy hurricanes hanging Florida. To make sure, statutory insurance coverage filings present that the [direct incurred] loss ratio for Florida householders’ insurance coverage was 93.0 p.c in 2017 and 103.3 p.c in 2018. Because of this the mixed ratio was roughly 123 p.c – 133 p.c, figuring in 30 share factors for bills. This was a extremely unprofitable, unsustainable consequence. =
The Miami Herald notes, “Regulators this yr are asking lawmakers to outline “honest and cheap” to incorporate the precise price of the service offered, the general well being of the insurer and the way a lot in dividends had been paid out. Regulators requested for that in 2023 however lawmakers rejected it, claiming it will “upset the apple cart” of Florida’s insurance coverage business.”
We’ll proceed watching, and welcome discussions and debate, concerning the Florida insurance coverage market.
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