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The Weekly: Florida's homeowners insurance crisis - YouTube
Channel: unknown
[0]
this is the weekly on clickorlando.com
[2]
with justin warmuth
[4]
good morning i'm justin warmuth when
[5]
lawmakers left tallahassee a few weeks
[7]
ago following the state's legislative
[9]
session they failed to address the major
[11]
insurance crisis impacting homeowners
[14]
across the state premiums are
[16]
skyrocketing and policies are being
[18]
dropped this morning tom cotton the
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owner of hugh cotton insurance in
[22]
orlando is here to break down what got
[24]
us in this mess and explain what you
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should do to protect your home
[30]
what is causing
[31]
this crisis right now
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well the crisis in the homeowners
[36]
industry is nothing new it's it's a pot
[38]
that's been boiling
[39]
really for it for years
[42]
uh and then we just keep kicking the can
[44]
down the road but the the crisis that
[46]
we're facing now is in the last two
[48]
years homeowners carriers doing business
[50]
in the state of florida have have had
[52]
3.5 billion dollars in claims paid 3.5
[56]
billion dollars and that is without
[58]
there being a major storm
[60]
uh across the coastline in the state of
[62]
florida
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we have
[65]
in florida in 2021 there were 117 000
[69]
property claims
[71]
filed for litigation
[73]
lawsuits filed for property homeowners
[76]
property claims 117
[79]
000 in the state of florida in the other
[81]
49 states there were 900.
[86]
900 lawsuits compared to 117
[91]
000 they're filing like 350 a day so
[94]
litigation is what is driving this yeah
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i mean i know that this has been
[99]
something that needs that has needed to
[101]
be addressed for years now but why are
[104]
folks seeing
[106]
the
[107]
dramatic rise in premiums is this just
[110]
the culmination of
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nothing being addressed and then
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this is the this is the year where
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it's going up by these large numbers
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well that's a great question and again
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it's a culmination of things that have
[125]
been brewing over a long period of time
[128]
rates have been suppressed all right for
[130]
a carrier to to do business in florida
[133]
they have to file their form meaning the
[135]
coverage contract that they wish to use
[137]
and their rates have to be approved by
[138]
the state of florida and the state is
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very stringent in the rates they will
[142]
approve also florida has an excess
[144]
profits law so you think that a carrier
[147]
abc insurance company that does business
[149]
in florida that writes home and auto and
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business that if they take a beating in
[154]
auto or beating in home insurance they
[156]
make it up on profits elsewhere that's
[157]
not the case florida has an excess
[159]
profits law
[160]
by line so if a carrier has a really
[163]
good year in automobile they have to
[165]
give money back if uh
[167]
and a carrier has a great year in
[168]
homeowners
[170]
those those premiums are restricted so
[172]
you take a difficult
[175]
uh uh
[176]
administrative environment that the
[178]
carriers have to submit themselves to
[181]
and then you add this uh claim
[183]
environment
[184]
with fewer carriers riding policies
[187]
carriers that are in financial apparel
[188]
fair carriers that have failed
[191]
and your supply chains a simple law of
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supply and demand you know if you've got
[195]
150 carriers all riding home insurance
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it's going to be competitive and cheap
[199]
when you've only got a handful it's
[201]
going to be expensive and couple that
[203]
with rising uh reconstruction cost of
[206]
homes
[207]
that's what's driving the rate increase
[209]
got it
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does the surf side condo collapse play a
[213]
role in this
[215]
uh not in central florida not in this
[218]
florida homeowners market you know the
[220]
coastal condo market is something
[221]
completely different coastal condo
[223]
market is something that we have very
[225]
limited
[226]
exposure to myself as an agent uconn
[229]
insurance simply because that's not
[231]
anything we wanted to really get
[232]
involved in that's not to say that we
[234]
don't insure condos we certainly do
[236]
insure condominium complexes on the
[238]
coast condominium complexes here in
[241]
central florida it's just we don't have
[242]
a big book of them
[244]
um
[245]
but it's the again there's going to be a
[247]
legislatively driven
[248]
issue there as to how free well they
[251]
already have to be inspected or have a
[253]
valuation every two years
[255]
um now it's going to be a matter of
[257]
state mandating inspections i think but
[260]
it's not it's not driving the homeowners
[262]
crisis here
[263]
all right so legislative action was not
[265]
taken during this last session
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what ideally needs to happen is this a
[271]
full overhaul
[273]
no it's not a full overhaul it's a
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problem by problem issue that's being
[277]
addressed when i i grew up right here in
[280]
central florida 62 years i've never
[282]
lived more than one block from where i'm
[283]
sitting right now and my porch always
[286]
had mildew
[287]
okay that's just this happens in florida
[289]
now when the lawyers started calling it
[291]
bold and it was bad for you they started
[293]
this crazy litigation and you saw
[295]
insurance companies adapt by
[298]
limiting or excluding exposure to mold
[300]
spores virus bacteria that sort of thing
[303]
then then the hot topic was uh water
[306]
damage and water leaks and the fraud
[308]
exploded in the water area in the
[311]
restoration area so insurance companies
[313]
limited
[314]
now you have carriers that either
[316]
exclude water loss altogether or limit
[319]
it to ten thousand dollars uh now the
[321]
problem is roofs and people are treating
[325]
their homeowners policy as a warranty
[327]
policy for a roof
[328]
when you buy a home your home has
[330]
consumables your appliances aren't going
[332]
to last forever your roof is only going
[334]
to have a 20 to 30 year life
[337]
so when a 25 year old roof is damaged by
[339]
a storm it wasn't necessarily damaged
[342]
because the storm was bad it was damaged
[343]
because the roof was old and you're
[345]
getting a brand new roof
[347]
for this so the fix is
[349]
one of the proposals that senator boyd
[351]
had in
[353]
when he wrote the bill
[354]
was to
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make roofs
[357]
uh an actual cash value
[360]
okay right now if you have damage to
[362]
your roof and it's five years old you
[363]
get a new roof your roof is 25 years old
[366]
you get a brand new roof so the proposal
[369]
was that and again i'm gonna i'm gonna
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paraphrase here just a little bit
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because i don't remember the exact
[373]
wording of the bill but if your roof is
[375]
like eight years old or less you'll get
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you'll get a brand new roof
[378]
if it's like 8 to 12 you'll get 60
[382]
12 to 17 years old you'll get 40
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so
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you you they replace what you've
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actually lost
[390]
okay 20 year old roof is damaged you
[392]
didn't lose a brand new route you lost a
[394]
20 year old roof and the value of that
[395]
20 year old roof is diminished value
[398]
the exceptions in the proposal were
[401]
if your roof is damaged by a hurricane
[403]
regardless of age you would still get a
[405]
brand new roof
[406]
and if your house was a total loss due
[409]
to catastrophic ground collapse what you
[411]
and i call sinkhole a contract calls it
[413]
catastrophic ground collapse or a fire
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uh you would still get a new roof part
[417]
of the bugaboo was
[419]
that your lenders require full
[421]
replacement costs
[423]
and there were some challenges there so
[426]
the legislature really needs to address
[427]
it and fix it and once they do
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i think you will see the market uh
[432]
respond it will respond slowly
[434]
but the market will open up
[436]
they didn't and so a special session now
[439]
is on the table now a date has not been
[442]
set for that but it seems like the
[444]
governor is leaving up to lawmakers to
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to set a date but is eyeing later this
[449]
year
[450]
is that too late does this need to be
[452]
addressed right now especially with
[454]
hurricane season approaching in just a
[455]
few months well we certainly hope it
[457]
would have been addressed and when the
[459]
when i read in the paper that there may
[460]
be a special session on the districting
[463]
i immediately texted my contacts in
[466]
tallahassee and said hey any chance
[468]
we're going to get property tied into
[470]
this and the answer and this is coming
[471]
straight from people that talk to the
[473]
governor's office every day
[474]
no it's not going to happen so i texted
[477]
back
[478]
you know what are our chances
[480]
and uh they said that with the current
[482]
house leadership it is not going to
[484]
happen so again the answer that i got
[487]
from tallahassee directly yesterday was
[489]
when they swear in the new house speaker
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which will be in november
[495]
then there will be a special session on
[497]
property
[498]
prior to the regular legislative session
[502]
in 2023 that's what i was told yesterday
[505]
obviously a lot can change
[507]
but
[508]
people up there know that we have a
[509]
problem we they know we need to get it
[511]
fixed it's you know again you gotta play
[513]
politics
[516]
and as we often say it only takes one
[518]
storm coming up what could happen to the
[520]
insurance market if central florida is
[522]
impacted by a major hurricane this
[524]
season plus what you should do if your
[526]
premium jumped this year stay with us
[532]
this is the weekly on clickorlando.com
[534]
with justin warmuth welcome back our
[537]
topic this morning florida's property
[539]
insurance crisis homeowners all over the
[541]
state seeing their rates jump sometimes
[543]
more than double or worse they're
[545]
getting dropped altogether it appears
[548]
lawmakers won't address the problem
[549]
until later this year but what happens
[551]
if central florida is impacted by a
[553]
major hurricane before then tom cotton
[556]
owner of hugh cotton insurance has that
[558]
answer plus some tips for homeowners
[563]
if we do get that storm this year
[565]
what does that look like is that a
[567]
full-on collapse
[569]
wow
[571]
that's a great question and we have we
[573]
have a little saying amongst ourselves
[574]
those of us that are active in you know
[576]
in the insurance business and active in
[578]
politics is you know this is a great
[580]
plan if the wind don't blow
[583]
okay if the wind blows everything
[585]
changes i think mike tyson always said
[587]
everyone has a plan to get punched in
[588]
the nose uh so the same is true we
[590]
certainly pray that uh florida will not
[593]
uh suffer any catastrophes because
[595]
right now our our carriers the carriers
[598]
and again when i say carriers we're
[600]
talking about the homeowners market okay
[602]
we're not talking about the insurance
[603]
industry in general we're focusing on
[605]
homeowners carriers
[607]
we are past the tipping point we have a
[609]
lot of carriers in very precarious
[611]
positions
[612]
all right
[613]
um carriers you know when they do
[615]
business they measure that in premium
[618]
but to do business in florida the law
[620]
requires that you have a certain amount
[622]
of surplus to support that premium
[624]
surplus is your ability
[627]
to pay claims and they measure that as
[629]
your premium to surplus ratio
[632]
why these carriers are stopping doing
[634]
business but why these carriers are
[636]
cancelling hundreds of thousands of
[638]
policies is they have to get their
[640]
premium down because their surplus has
[642]
been impaired by these excessive losses
[645]
now this problem is being exacerbated by
[647]
the fact that the carriers that have
[649]
failed
[650]
the florida insurance guarantee
[652]
association which is the state entity
[655]
that pays the claims of bankrupt
[657]
insurance companies okay there is there
[660]
is a support network there if you have a
[661]
carrier that goes broke state does have
[664]
a support network that's funded by the
[665]
other carriers figa has authorized a 350
[669]
million dollar
[670]
assessment
[672]
to pay the legacy claims of the carriers
[674]
that have recently been placed into
[676]
insolvency the problem is when they do
[678]
that they tell each carrier what you owe
[681]
to the fica fund and then they put a
[684]
they will put an assessment on your
[686]
homeowner's policy on your automobile
[688]
policy online on all policies written in
[691]
florida but it'll be a dollar two
[692]
dollars three dollars and as they
[694]
collect the money they forward that on
[695]
to figo to pay the claims as they come
[697]
in
[698]
but the state has said we want that 350
[700]
right now so the carriers are having to
[703]
pay their figa assessment which further
[706]
impairs their surplus you get this
[709]
so if they got to write a 30 million
[711]
dollar check to pay their fica that's
[713]
like taking another 30 million dollars
[715]
in claims because it directly reduces
[717]
their surplus
[718]
now in july
[720]
the insurance companies begin their
[722]
reinsurance treaty negotiations okay
[725]
that's the insurance that insurance
[726]
companies buy and the price you pay is
[728]
based upon your financial strength
[731]
so they're already impaired
[734]
the fi gun makes their impairment worse
[737]
and now their reinsurance costs will
[739]
either go up
[741]
which again will drive more rate
[743]
increases or they will be uh unable to
[746]
purchase the same level of reinsurance
[749]
they purchased in the past
[751]
which means that if the wind blows
[752]
they're more likely to fail so you see
[754]
how we're circling this drain and it
[756]
keeps getting worse and worse and i know
[758]
you may be sorry you ever asked me to
[761]
answer these questions but that's how it
[763]
works no it's but it's impacting so many
[766]
people and
[768]
i'm curious if you have any advice for
[771]
homeowners who are seeing these premiums
[773]
and saying that's too expensive or
[776]
any tips for prospective home buyers who
[779]
are looking to buy we know so many are
[782]
and they're looking for
[784]
an affordable rate and they're not
[786]
seeing it based on what we're dealing
[788]
with and all the issues that are playing
[791]
a role in this
[792]
again you have asked a great question um
[795]
first of all
[796]
what i tell people is i mean i'm in the
[798]
business of selling insurance and i want
[799]
you to call my office i want you to talk
[801]
to my personal line staff i want you to
[803]
buy from us
[804]
but when someone calls our office and
[806]
say hey i got a renewal i went from 28
[808]
to 4 200. we say stop right there you
[811]
got a renewal
[813]
count yourself lucky pay the bill
[815]
don't hassle they're going well but i
[817]
can't afford that i said okay if you
[819]
can't afford the increase can you afford
[821]
to replace your air conditioner in your
[823]
roof because that's what you're going to
[824]
have to do for me to get you a quote so
[827]
uh the advice and again you've asked a
[829]
great question and thank you for giving
[830]
me the opportunity to say this on
[832]
television because if you have a renewal
[834]
quote count yourself lucky and take it
[838]
if you're buying a home or if you're
[840]
simply you're still curious about
[842]
shopping there's some things that we as
[844]
agents have to have because the
[846]
underwriters are requiring it
[848]
you're going to need to have a what's
[850]
called a four-point inspection
[852]
that's where a professional home
[853]
inspector comes out and they look at the
[855]
roof the air conditioning
[858]
the plumbing and the electric
[860]
and uh it will give us the age and
[862]
condition
[864]
a lot of carriers if your roof is more
[865]
than five years old they won't take
[867]
some or ten
[869]
if you have a flat roof when i say flat
[871]
that's usually a rock and tar roof
[873]
carriers won't take you it's befuddling
[875]
to me because a rock and tar roof will
[877]
last 50 years
[879]
but they don't take rockin tar roofs if
[881]
you have polybutyl plumbing or any
[883]
galvanized plumbing they won't take it
[885]
if you have copper wiring they won't
[886]
take it if you have stab lock or fedora
[889]
pacific use panels they won't take it
[891]
your air conditioner is more than 20
[892]
years old your hot water heater is more
[894]
than 15 years old you're gonna have to
[896]
replace those things so there's a lot of
[898]
money to be spent if your increase went
[901]
from 2800 to 4200 and you don't want to
[903]
pay it you might have to spend a lot of
[905]
money to keep a lower premium
[908]
they also do what is called a win
[909]
mitigation inspection that looks at the
[912]
nail patterns of the truss plates and
[914]
the size of the nails and the accuracy
[916]
of the nailing uh so a good four point
[918]
and a windmill that says that you've got
[920]
a well-constructed home help you
[923]
considerably
[925]
now let me ask you this because uh i
[927]
know that this also plays you can tell
[929]
me better than i know but
[932]
does the citizens
[933]
uh insurance that the state it's the
[935]
state-backed insurance is that
[938]
is that the default for some folks who
[940]
can't
[941]
you know afford or they're getting
[943]
dropped is that where they're going
[946]
yeah a lot of folks are ending up in
[948]
citizens and you can't see it but
[950]
there's on my wall right behind me is a
[952]
gift from the governor governor bush
[955]
i was the chairman of the board of the
[956]
state agents association when citizens
[958]
was created citizens was
[961]
created to save the state like 70
[963]
million dollars in taxes when they
[965]
merged their residential property and
[966]
casually joint underwriting association
[968]
with the wind pool
[970]
citizens is a merger of those two
[971]
entities
[972]
the challenge is because there was some
[975]
politics behind it
[977]
tom gallagher was the insurance
[978]
commissioner he was running for governor
[981]
when citizens was put together
[984]
the the law says that citizens can't
[987]
charge a rate that's less than the
[989]
average of the 10 highest private
[992]
carriers in the area citizens wasn't
[994]
intended to be a competitive market
[996]
uh but the the figures they were using
[998]
when citizens were created were like
[999]
eight or nine years old so when citizens
[1001]
was created it was the most price
[1004]
competitive product there was which is
[1006]
why citizens exploded
[1008]
i became the second largest homeowner
[1010]
insurer in the country so um citizens
[1013]
has done a lot barry gillway the head of
[1015]
citizens has done a phenomenal job in
[1018]
getting the policy writing down citizens
[1020]
is now financially
[1022]
strong they can they can take major
[1024]
losses but citizens has doubled in size
[1026]
in the last year um the rates are still
[1028]
not actuarially sound completely
[1031]
um so a lot of these policies are ending
[1034]
up in citizens because that's that's the
[1036]
entity that is created to be able to
[1038]
take homes that are otherwise
[1039]
uninsurable
[1041]
but it's also competitive in some areas
[1043]
so it shouldn't be but a lot of people
[1046]
are going there but citizens also has
[1048]
rules
[1049]
they won't take everything they still
[1051]
have to have their own type of
[1052]
inspection and the citizens inspection
[1054]
can be more stringent than the regular
[1056]
four point so you mentioned citizens but
[1059]
it's not an automatic entry
[1061]
i think that's the um i think that's i
[1063]
think well no no i think that's that was
[1065]
the point i was trying to get across is
[1066]
that people just think if their private
[1069]
insurer is dropping them or raising
[1071]
their rates they can just go there and
[1072]
find a lower rate and get automatically
[1075]
insured and that's not the case that's
[1077]
that that was basically the point i was
[1078]
trying to make is that accurate
[1081]
yes yes
[1082]
you've asked a great question again
[1083]
sorry for a long answer but you know
[1085]
there's so much information that the
[1087]
general public does not know okay
[1089]
insurance is bought and sold as a
[1091]
commodity for the most part by both
[1093]
people that sell it
[1094]
and by the people that buy it they want
[1096]
faster and cheaper and in what world do
[1099]
you get something better for less money
[1101]
and insurance is a contract it is a
[1104]
written contract it is not a commodity
[1106]
so you have to very carefully look at
[1108]
what the contract says and cheaper is
[1110]
not always better in fact in the
[1111]
insurance business the exact opposite is
[1113]
true
[1116]
and my thanks to tom cotton for his
[1117]
insight this morning for more
[1119]
information on florida's home insurance
[1120]
crisis just head over to
[1122]
clickorlando.com weekly i'm justin
[1124]
warmuth hope you have a great sunday
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