DeSantis’ political future? It’s property insurance

Maybe he realizes it. And maybe he understands that if he doesn’t get this right, this could wipe out his chances of being elected president.

While Florida Gov. Ron DeSantis is riding high as the nation’s leader against woke-ism and a potential white knight presidential candidate for the nation’s Republicans, long after he is gone from Florida politics, his legacy will be tied to the issue Florida legislators are addressing this week in Tallahassee: property insurance.

Ugh. Talk about a subject that makes your eyes glaze over, gives you headaches and ranks up there with root canals. That’s property insurance.

But at this moment in Florida history, the issue of property insurance is a catastrophic economic disaster, worse in scope than the damage from Hurricane Ian. 

While Ian wiped out and damaged an estimated $47 billion in insured property in Southwest Florida, the rising and increasingly prohibitive costs of homeowners’ property insurance affect every inch and corner of this wonderful state. Anyone who has a roof over his head has seen his/her property insurance premiums rise from year to year faster than Joe Biden’s inflation.

On Longboat, a property owner told us last week not to expect to see his annual Christmas lights because he is “hardening” the outside of his bayfront house. “I’m tired of paying $37,000 a year for insurance,” he said.

When a homeowners association on Longboat had its policies canceled this past summer, some of the residents in the development took what they could get for their $1 million single-family homes — a $50,000-a-year policy.

Those are top-end examples. But everyone knows the story: The standard in Florida for has been in the range of 25% to 33% increases.  Pardon the cliché, but property insurance has gone through the roof.

Florida is the worst insurance market in the nation. And that’s primarily because of how Florida’s trial lawyers cajoled lawmakers in years past to adopt laws that created a feeding trough for a small group of unscrupulous lawyers, adjusters and roofers.

You’ve read and heard the stories: In 2020, Florida homeowners filed 8.8% of the insurance claims for all of the U.S., but Florida accounted for 79.1% of the property insurance lawsuits filed in the U.S. Those percentages have held each year going back to 2016.

We don’t have the space to explain, nor do you have the patience to read, all of the reasons behind this costly trend, but they bring a cascade of consequences: Insurance carriers keep raising rates to account for the costs of the lawsuits. They then must buy more reinsurance, but the reinsurers raise their rates because of the unpredictable costs of litigation (on top of the damage costs from storms). 

More effects: Since 2019, 10 Florida-based insurers went bankrupt — brought on by not having enough capital that would allow it to cover its policyholders’ claims from storms and litigation.

OK, enough of the Death-Bed state of Florida’s property insurance market. Gov. DeSantis, a few legislators (Most of them don’t know a thing about insurance.) and everyone in the industry knew at the beginning of the year the industry was on the verge of total collapse and in the emergency room with just a few months to live. It would need triage and hours upon hours of open-heart surgery in 2022. 

The first round of triage occurred in May, seven months before the November election. DeSantis knew Charlie Crist would try to blame him for doing nothing. So that brought on the first special legislative session.

The triage helped. In the scheme of things, the changes adopted were minor adjustments stanched the gush of blood and allowed the industry to hang on for surgery.

Once DeSantis’ reelection was complete, the governor turned his attention to scheduling the open-heart surgery. That’s what is occurring this week.

Once again, Sen. Jim Boyd, R-Bradenton, is the governor’s point man in the Senate. He sponsored the main bill SB 2A, which was described as the “kitchen sink” bill. It was 105 pages — a monstrosity that few normal human beings would understand.

But here are three of the most important elements:

1. It would eliminate one-way attorney fees. Heretofore, if, say, Morgan & Morgan represented a policyholder in a lawsuit and won a judgment, the insurance company was required to pay his fees (on top of the insurer’s own legal fees). That is expected to be eliminated.

Opponents of the bill say this will hurt Florida’s middle class and poor, because they will be less inclined to file suits because they can’t afford a lawyer. And the trial lawyers will be less likely to take on small claim cases.

To be sure, this will reduce the number of lawsuits.

2. It would eliminate the practice of assignment of benefits altogether. That means after Jan. 1, 2023, a policyholder can no longer sign whatever benefits he obtains from his insurance company to his lawyer or contractor.

3. It would require the state-owned Citizens Property Insurance Corp. to charge actuarially sound rates. That means Citizens can no longer charge rates less than what is being charged by other insurers. This is to provide a disincentive for Citizens to grow — and potentially increase the taxpayers’ liabilities to cover Citizens’ losses. 

There are other provisions addressing reinsurance and the state catastrophe fund, including transferring $1 billion in taxpayers’ general revenues to help subsidize Florida insurers in need of additional reinsurance.

By the time the session ends, here’s what you can expect: Gov. DeSantis, Sen. Boyd and the Senate and House leadership will characterize these changes as extraordinarily successful heart surgery. The trial bar will castigate them.

And consumers: It will take at least 18 months for the changes to have any effect. By then, Gov. DeSantis will either be a hero and onto the national scene or have more work to do on property insurance.

Prediction: The latter. But that’s OK. At least he is addressing one of Florida’s most pressing economic challenges.