‘Too little, too late’ • St Pete Catalyst

St. Petersburg Senator Jeff Brandes believes the recently signed homeowners insurance bill could mitigate many of Florida’s problems, if passed by the Legislature in 2019.

Brandes, long a proponent of homeowners insurance reform, led calls for a special session to address the issue in April after lawmakers failed to agree on a bill during the March regular session. The limited-term state senator got his wish when Governor 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 homeowners insurance market in a generation” in a post-signing statement. Still, many lawmakers on both sides of the aisle feel the legislation didn’t do enough to protect businesses or lower premium costs.

“The problem is, and I said this during the debate, what we have is a stage 4 cancer in the property insurance system,” Brandes told the Catalyst. “And we are treating it with Stage 1 solutions.”

Brandes called the bill “too little, too late” and said it’s not enough to help the industry or consumers. He said the biggest challenge in Florida is fraudulent roofing claims, and the solution is to realign incentives.

He said he pushed hard for companies to provide actual cash value instead of paying the cost of a new roof. He explained that if someone adds his 2010 Toyota Corolla, his auto insurance doesn’t offer the cash value of the latest model.

“If you have an insurance claim on a roof that is 20 years old, the company will buy you a new roof and many are forced to offer that type of coverage,” Brandes said. “That changes the incentives.

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“We would have a lot more car accidents, I guarantee you, if your insurance company had to buy you a new car…”

WFLA reported that on the same day the Governor signed the amendments to the law, Southern Fidelity Insurance Company notified agents that it would suspend new business and renewals until they could secure full 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 trade in an old roof for a new one is why Florida accounts for 80% of the nation’s homeowners insurance litigation but only 8% of open claims.

The new bill sped through the House and Senate with overwhelmingly bipartisan support. Lawmakers were eager to pass the legislation, even as a first step, before the start of hurricane season on June 1. The new law creates a $2 billion reinsurance program to help policyholders to help companies mitigate risks.

The legislation also prohibits companies from automatically denying coverage based on the age of the roof, if it is less than 15 years old. Brandes said the provision may seem consumer-friendly, but it will cause insurers to deny claims for other reasons.

“For example, the age of the household,” Brandes added. “That is perfectly fine and completely allowed.”

Many companies, Brandes said, will have no choice but to find ways to reduce their exposure to litigation.

“If you squeeze a balloon at one end, the air will rush to the other.”

Brandes called the bill necessary to save some carriers, but not enough. In the coming weeks, he expects more insurers to be derated, potentially releasing an additional 100,000 policies onto the market just as hurricane season begins.

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Other private companies can’t absorb as many policies, Brandes said. Many will go to Citizens, the state-backed insurer and often the last resort for homeowners struggling to find coverage in the private market.

Brandes said lawmakers have avoided addressing concerns with the subsidized insurer, which projects to have more than 1 million policies by the end of the year. He believes Citizens could hit that milestone by the third quarter and said it’s hard to turn owners away from Citizens because its rates are “generally half” the cost of a traditional market-based policy.

“Citizens only has $6 billion in reserves and yet potentially has $300 billion in liabilities,” Brandes said. “We would never let a regular insurance company grow as fast as Citizens is forced to grow, because you can’t build reserves fast enough.”

The exponential growth of citizens is a risk for all Floridians, Brandes said, because the lack of premiums to cover risk exposure will affect the state’s bond rating. He added that Citizens’ rates are set politically rather than based on “real rules.”

Brandes said that prior to 2006, the state required Citizens’ rates to remain competitive with the top 10 insurers in a region. He said that people are now abusing the program, since a third of all subsidized policies are for second homes.

“So what ends up happening is that millionaires from New York can come in, buy a house in the Keys and get the Citizens subsidy,” Brandes said. “And you and I can foot the bill if they really have a claim.”

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The situation is so critical that the senator believes lawmakers could meet again 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 attorneys to convince homeowners to file a claim.

“They look at it like they just found a pot of gold at the end of that tropical storm,” he said. “The Legislature did very little to reduce the amount of litigation.”

Brandes, whose term is limited in November, said he will attend all of the special sessions between now and Election Day. Meanwhile, he tours prisons and continues to advocate for his other passion: criminal justice reform.

Brandes is still committed to starting a nonprofit policy firm to continue working on issues close to his heart. That includes transportation and affordable housing, plus property insurance and criminal justice reform. He said he doesn’t want to leave the job unfinished and hopes to share the knowledge gained during his 12 years in office.

“I’ve worked really hard over the last decade to learn these things and become an expert on these subjects, or at least as expert as I can be,” Brandes said. “So, I want to continue to work on that and educate legislators.”