The Sarasota Tiger Bay Club hosted a presentation on the ‘insurance crisis” today. I was a panelist along with a State Farm agent representative and a Citizens Property Insurance Corporation spokesperson. I always find these discussions with different perspectives interesting. The questions from the audience are enlightening regarding the public’s perception.
Assignment of Benefits (AOB) was a major part of the discussion. It is hard to argue with an agent that a $250 gift coupon just to allow a person to inspect a roof might signal a “feeding frenzy” of greed. It certainly did to a Florida legislature that then eliminated many consumer protections.
The Citizens representative, Christine Ashburn, was quite effective sharing a long-term perspective that led to the most recent “insurance crisis.” She has been with Citizens for 18 years. She noted that rates also needed to be increased by about 20% just to account for the increased costs of construction and inflation.
My perspective is a little longer and national. I told the audience that the causes of Florida property insurance increases are complex, with many micro and macro issues.
The insurance industry, almost by itself among major corporate industries, has been sounding the alarm bell about climate change and our need to do something about it since the 1990s. Large catastrophic natural disasters drive insurance rates. Wildfires, tornadoes, hailstorms, ice storms, drought, flooding, and hurricanes are more severe and frequent worldwide. The cost of construction has increased throughout the country. Investments in other forms of finance are more profitable with higher margins. These are macro issues that increase property insurance rates and the availability of insurance.
Florida’s increase in AOBs and laws in Florida are micro issues. Florida legislators took a hammer to the micro issues providing the insurance industry with virtually everything they could ask for.
The Florida property rates will not come down in the short term. They are not expected to go down anywhere in the United States because of the macro issues and problems. Indeed, I am not so certain Florida rates will come down in the long term, although they certainly will not go up as fast.
I reminded the audience that it will be very profitable for new insurance companies in Florida. New companies will have very high rates and very little accountability when they refuse to pay claims fully or fairly. I seriously quipped that investors with $10 million extra should consider starting a new Florida property insurance company.
An attorney in the audience asked if the legislature went too far in changing laws that had been in the books for over 100 years. Of course, I agreed. But the insurance industry has a thousand like Christine Ashburn with a multi-million-dollar public relations budget. My side (the policyholders with claims) lost, and that is just the way it is.
One audience member asked about condominium insurance rates. Unfortunately, I had to tell her that they are not going down. Indeed, the value of condominium property will be under massive pressure because new laws require structural maintenance reserves to be fully funded. If properly maintained, the long-term rates for condominiums may ease somewhat, but not in the short term. This is true for most coastal-based condominium structures throughout the United States.
I wish I had better news to tell the audience. My experience is that people want to hear the truth. Once people know where they stand, it is often easier to figure out where to go and make a plan to get there.
Sorry I did not get a blog out a little earlier today. I appreciate all the public and private comments from readers about posts this week.
Let’s all strive to make 2023 our best year ever!
Thought For The Day
Three things cannot be long hidden: the sun, the moon, and the truth.