All posts by Jeff Dunsavage

Homeowners Insurance

Homeowners Claims Costs Rose Faster Than Inflation for 2 Decades

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By Max Dorfman, Research Writer, Triple-I

The cost of claims per insured home in the United States has increased at a rate outpacing inflation over the past 20 years, according the Insurance Research Council (IRC) — like Triple-I, an affiliate of The Institutes.

A new IRC study, Trends in Homeowners Insurance Claims: 2001–2021, attributes this to a combination of natural catastrophes, human-made disasters, rising home-repair costs, and ongoing population migration into disaster-prone areas.

A close-up of a graph Description automatically generated with low confidence

Insurers also continue to wrestle with insurance fraud and claim abuse following disastrous events. These trends have cut into profits and led several major insurers to reduce their capacity in some U.S. states or leave the homeowners market entirely.

Other findings include:

  • Countrywide average loss costs (average claim payment per insured home) increased throughout the past two decades and rose nine percent in 2021.
  • Claim severity is increasing, while frequency is declining—in part because of widespread adoption of higher policyholder deductibles, including percentage deductibles for specified perils, and premium surcharge programs designed to reduce the number of lower-cost claims.
  • Catastrophe losses play an increasing role because of natural disaster trends and the methods used to define and categorize catastrophe claims.
  • Average loss costs for claims vary widely by state. States with the highest loss costs are Louisiana and Mississippi; states with the lowest are Hawaii and Maine.
  • States with the highest claim frequency over the period include Louisiana, Mississippi, and Oklahoma. States with the highest severity include California, Alaska, and Florida.

“During the two decades of the study period, the U.S. homeowners market has experienced a surge in volatility, mainly driven by a barrage of disasters, such as hurricanes Katrina, Ike, Michael, Rita, Sandy and Wilma and California fires,” said Dale Porfilio, IRC president and chief insurance officer for Triple-I.

Porfilio also noted that another challenge facing the homeowners insurance market is the continued threat of insurance fraud and claim abuse, especially after natural disasters. 

“Industry and government organizations have increased efforts to inform consumers about potential scams, to investigate and prosecute the perpetrators, and to enact legislative changes to make systems less vulnerable to abuse,” Porfilio added.

Learn More:

How Inflation Affects P/C Insurance Rates and How It Doesn’t (Triple-I Issues Brief)

Drivers of Homeowners’ Insurance Rate Increases (Triple-I Issues Brief)

Florida’s Homeowners Insurance Crisis (Triple-I Issues Brief)

Louisiana Insurance Crisis (Triple-I Issues Brief)

From the Triple-I Blog

As Building Costs Grow, Consider Your Homeowners’ Coverage

Lightning Sparks More Than $1 Billion in Homeowners Claims Over Five Years

Triple-I Brief Explains Rising Homeowners’ Insurance Premium Rates

Homeowners Premiums Rise Faster Than Inflation; Expect This to Continue

Insurers and the Economy, Legal Environment

Indiana Joins March Toward Disclosureof Third-PartyLitigation Funding Deals

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Indiana has become the latest state to require disclosure of third-party litigation funding in civil lawsuits.

The legislation – signed into law by Gov. Eric Holcomb on April 20 – requires that each party in a civil proceeding and each insurer that has a duty to defend a party in court be notified of any litigation funding agreement before the case begins.

The U.S. Government Accountability Office defines third-party litigation funding as “an arrangement in which a funder who is not a party to the lawsuit agrees to help fund it.” Global multi-billion-dollar investing firms have made third-party litigation funding their sole or primary business and are experiencing strong growth.

As the market lacks transparency, estimates on its size can vary but, according to Swiss Re, more than half of the $17 billion invested into litigation funding globally in 2020 was deployed in the United States. Swiss Re estimates the market will be as big as $30 billion by 2028. Meanwhile, affordability of insurance coverage – especially for commercial auto products – has come under threat from increases in litigation and claim costs.

Several states have preceded Indiana in seeking to increase transparency around third-party litigation funding.  In 2018, New York enacted legislation that added Section 489 to the New York Judiciary Law. This law mandates the disclosure of litigation financing agreements in class action lawsuits and certain aggregate settlement cases. In the same year, Wisconsin instituted a statutory provision requiring the disclosure of litigation funding arrangements. West Virginia followed suit in 2019.

In 2021, the U.S. District Court for the District of New Jersey amended its rules to require disclosures about third-party litigation funding in cases before the court. The Northern District of California imposed a similar rule in 2017 for class, mass, and collective actions throughout the district.

In 2022, Illinois passed the Consumer Legal Funding Act (S.B. 1099), which implemented several statutory provisions regulating aspects of third-party litigation funding, but it doesn’t  address disclosure of these arrangements or information about the existence of a funding arrangement to defendants as part of claim litigation.

Litigation funding not only drives up costs – it introduces motives beyond achieving just results to the judicial process. This is why the practice was once widely prohibited in the United States. As these bans have been eroded in recent decades, litigation funding has grown, spread, and morphed into forms that can cost plaintiffs more in interest than they might otherwise gain in a settlement. In fact, it can encourage lengthier litigation to the detriment of all involved – except for the funders and the plaintiff attorneys.Top of Form

The National Association of Mutual Insurance Companies (NAMIC) applauded Indiana’s move.

“Litigation funding is a multi-billion-dollar industry that for years has driven up the length and cost of civil cases,” said Neil Alldredge, president and chief executive officer of NAMIC. “While there is much more that needs to be done to address this issue, this law represents important progress.”

Revealing litigation funding from a third party before commencement of a lawsuit “will help thwart opportunistic investors from promoting return on investment over client interests and siphoning value from clients away from policyholders, claimants and insurers,” Alldredge said.

Learn More:

What Is Third-Party Litigation Funding and How Does It Affect Insurance Pricing and Affordability?

U.S. Study of 3rd-Party Litigation Funding Cites Market Growth, Scarce Transparency

IRC Study: Public Perceives Impact of Litigation on Auto Insurance Claims

Litigation-Funding Law Found Lacking in Transparency Department

A Piecemeal Approach Toward Transparency in Litigation Finance

Lawyers’ Group Approves Best Practices to Guide Litigation Funding

Business Insurance, Business Risk, Risk Management

Beyond Fire: Triple-I Interview Unravels Lightning-Risk Complexity

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Lightning is a more complex peril than it is often given credit for being, according to Tim Harger, executive director of the Lightning Protection Institute (LPI). In a recent interview with Triple-I CEO Sean Kevelighan, Harger discussed the importance of preparing for and preventing damage from this risk, which is second only to flooding when it comes to costly weather events.

People typically think about fire damage when they think about lightning. But Harger said, “Beyond the fire is the destruction of electrical wires and infrastructure that supports everything we do to communicate and to conduct business.”

If lighting strikes any of these structures, he said, “Activity is stopped.”

Harger cited the case of an East Coast furniture manufacturer that was struck.

“That one lightning strike cost them just over a million dollars in damage,” he said. “Yes, there was the typical fire that caused structural damage, but what was impacted on the ‘inside’ was even more costly. They had damaged inventory, production downtime, and loss of revenue during the repairs.”

Investment in a lightning protection system could have saved this business owner – and his insurer – the million dollars lost and prevented business interruption. Nearly $1 billion in lightning claims was paid out in 2018 to almost 78,000 policy holders, according to LPI.

“Lightning strikes about a 100 times every second,” Harger said. “When installed properly, lightning protection systems are scientifically proven to mitigate the risks of a lightning strike.”

 A lightning protection system consists of six parts: 

  • Strike termination device,
  • Conductors,
  • Grounding,
  • Surge protection,
  • Potential equalization, and
  • Inspection. 

Architects and engineers play an important role in specifying and designing these systems, and installation is completed by certified lightning protection contractors. When properly installed lightning is intercepted by the strike termination device and energy is routed through the conductors and into the grounding system, preventing impact to the structure or electrical infrastructure.

“Businesses already install fire alarms and sprinkler systems to mitigate greater risks of fires,” Harger said. “Lightning protection systems prevent a lightning strike from causing any damage. So the investment in a lightning protection system prevents personal injury and the costly impact of even one strike.”

Several insurers offer premium discounts for policyholders who invest in lightning protection systems. LPI invites insurance providers who are interested in sharing their customer incentives to contact them at lpi@lightning.org.

Auto Insurance, Legal Environment

Michigan No-Fault Reform Yields Fewer Claims, Lower Premiums

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By Max Dorfman, Research Writer, Triple-I

Michigan’s no-fault system reform law, effective in 2020, has led to personal auto insurers paying out fewer claims and many drivers paying less in premiums, according to recent research by two Triple-I nonresident scholars.

The study, No Fault Auto Insurance Reform in Michigan: An Initial Assessment, co-authored by Patricia Born, Ph.D. of Florida State University and Robert Klein, Ph.D. of Temple University, observed substantial decreases in average liability premiums and personal injury protection (PIP) loss costs in 2022. PIP covers the treatment of injuries to the driver and passengers of the policyholder’s car in a no-fault auto insurance system. 

“Our initial evaluation of the likely effects of the reform legislation indicates that it is significantly reducing the costs of auto insurance for many Michigan drivers,” the paper states. “How much these reductions will be for any given driver will depend on the PIP option they choose, among other factors.”

The average Michigan policyholder paid $2,611 annually for personal auto insurance coverage in 2019 and $2,133 in 2022, an 18 percent decrease, according to Insure.com. Before the state’s no-fault auto insurance system reform law took effect in July 2020, Michigan regularly ranked as one of the costliest states in the U.S. for personal auto insurance coverage.

The 2020 reform law’s enactment allowed for:

  • Reducing auto insurer payouts of high PIP medical benefits;
  • Instituting medical cost controls;
  • Broadening the state’s authority to regulate personal auto insurance rate filings;
  • Creating a Fraud Investigation Unit within the Department of Insurance and Financial Services; and
  • Restricting auto insurer use of “non-driving” rating factors (e.g., credit-based insurance scores).

Michigan was the only state to offer unlimited medical benefits through the PIP portion of an auto insurance policy. Insurers also were severely constrained in controlling the medical costs arising from PIP claims. This cost contributed to more than one in four drivers (26 percent) on Michigan’s roadways being uninsured in 2019, the Insurance Research Council (IRC) estimated, nearly twice the national average (13 percent). Michigan is one of 12 no-fault states in the U.S. These systems allow policyholders to file claims with their own insurer after an accident, regardless of whom caused the accident. No-fault states restrict lawsuits to serious cases and promote faster claim payouts. 

Learn More:

IRC Releases State Auto Insurance Affordability Rankings

Why Personal Auto Insurance Rates Are Likely to Keep Rising

Triple-I Issues Brief: Personal Auto Insurance Rates

Auto Insurance, Homeowners Insurance, Insurers and the Economy, Legal Environment, Market Conditions, Regulation

Louisiana’s Insurance Woes Worsen as Florida Works to Fix Its Problems

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As Florida strives to address the issues that led to its current property/casualty insurance crisis, another hurricane-prone coastal state, Louisiana, is navigating its own insurance troubles.

The Louisiana property insurance market has been deteriorating since the state was hit by a record level of hurricane activity during the 2020/2021 seasons, Triple-I says in a new Issues Brief on the state’s insurance crisis. Twelve insurers that write homeowners coverage in Louisiana were declared insolvent between July 2021 and February 2023.

“While similarities exist between the situations in these two hurricane-prone states, the underlying causes of their insurance woes are different in important ways,” said Mark Friedlander, Triple-I’s director of corporate communications. “Florida’s problems are largely rooted in decades of litigation abuse and fraud, whereas Louisiana’s troubles have had more to do with insurers being undercapitalized and not having enough reinsurance to withstand the claims incurred during the record-setting hurricane seasons of 2020 and 2021.”

Insurers have paid out more than $23 billion in insured losses from over 800,000 claims filed from the two years of heavy hurricane activity. The largest property loss events were Hurricane Laura (2020) and Hurricane Ida (2021). The growing volume of losses also drove a dozen insurers to voluntarily withdraw from the market and more than 50 to stop writing new business in hurricane-prone parishes.

This is not to say legal system abuse is absent as a factor in the Louisiana’s crisis – quite the opposite, as highlighted by Insurance Commissioner Jim Donelon’s cease-and-desist order, issued in February, against a Houston-based law firm. According to Donelon, the firm filed more than 1,500 hurricane claim lawsuits in Louisiana over the span of three months last year.

“The size and scope of McClenny, Moseley & Associates’ illegal insurance scheme is like nothing I’ve seen before,” Donelon said. “It’s rare for the department to issue regulatory actions against entities we don’t regulate, but in this case, the order is necessary to protect policyholders from the firm’s fraudulent insurance activity.”

McClenny Moseley has since been suspended from practice in Louisiana’s Western District federal court over its work on Hurricane Laura insurance cases.

A regular on the American Tort Reform Foundation’s “Judicial Hellholes” list, Louisiana’s “onerous bad faith laws contribute significantly to inflated claims payments and awards,” according to a joint paper published by the American Property Casualty Insurance Association (APCIA), the Reinsurance Association of America (RAA), and the Association of Bermuda Insurers and Reinsurers (ABIR).

“Insurers who fail to pay claims or make a written offer to settle within 30 days of proof of loss may face penalties of up to 50 percent of the amount due, even for purely technical violations,” the paper notes. “To avoid incurring these massive penalties, which are meted out pursuant to highly subjective standards of conduct, insurers sometimes feel compelled to pay more than the actual value of claims as the lesser of two evils.”

As a result of these converging contributors, Louisiana Citizens Property Insurance Corp. – the state-run insurer of last resort – has grown from 35,000 to 128,000 policyholders over the past two years, according to the Louisiana Department of Insurance.

Learn More:

Louisiana Insurance Regulator Issues Cease & Desist Order to Texas Law Firm

Hurricanes Drive Louisiana Insured Losses, Insurer Insolvencies

Auto Insurance, Legal Environment, Market Conditions

IRC Outlines Florida’sAuto Insurance Affordability Problems

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Florida is one of the least affordable states for personal auto insurance, according to a new study by the Insurance Research Council (IRC). Claims trends are pushing premium rates up nationwide, and Florida is being hit particularly hard.

In 2020, the average expenditure for auto insurance was $1,342 in Florida, more than 30 percent higher than the national average, the IRC report says, citing data from the National Association of Insurance Commissioners (NAIC). In terms of affordability, IRC says, auto insurance expenditures were 2.39 percent of the median household income for the state. Only Louisiana was less affordable.

“Efforts to improve auto insurance affordability must begin with the underlying cost drivers,” the IRC report says. In nearly every of these categories, Florida costs are well above the national average:

Accident frequency: The number of property damage liability claims per 100 insured vehicles in Florida is 10 percent above the national average.

Repair costs: For years, the average cost of a property damage claim in Florida was below the national average. However, evidence suggests repair costs are increasing faster in Florida than elsewhere.

Injury claim relative frequency: Floridians show a greater propensity to file injury claims once an accident occurs, with a relative claim frequency 40 percent higher than the national average. Florida is the only no-fault state with an above-average ratio of bodily injury to property damage claim frequency.

Injury claim severity: The median amount paid per claim for auto injury insurance claims for all injury coverages combined is much higher in Florida.

Medical utilization: Florida auto claimants are more likely than those in other states to receive diagnostic procedures, such as magnetic resonance imaging (MRI).

Attorney involvement: Florida claimants are more likely to hire attorneys. Attorney involvement has been associated with higher claim costs and delays in settlement time.

Fraud and buildup: The percentage of all auto injury claims with the appearance of claim fraud and/or buildup is evidence of Florida’s culture of fraud.

Uninsured motorists: Florida has one of the highest rates of uninsured motorists, both a symptom and a cause of affordability challenges.

Litigation climate: According to a survey of business leaders, Florida’s legal environment ranks near the bottom of state liability systems in terms of fairness and reasonableness.

“Unique features in Florida’s insurance system and a long‐standing culture of claim and legal system abuse have allowed some medical and legal professionals to generate substantial income for themselves at a significant cost to Florida drivers,” said Dale Porfilio, IRC president and Triple-I chief insurance officer. Triple-I and IRC are both affiliated with The Institutes.

Policymakers in the Sunshine State enacted substantial property insurance reform in late 2022 to address the affordability and availability crisis in homeowners’ insurance and pledged to tackle similar issues in other lines of insurance to ease the financial burden that paying for auto insurance represents for Florida drivers.

Bills being addressed by the state’s Senate and House focus on significant tort reform to stop lawsuit abuse, including the elimination of one-way attorney fees for litigated auto claims and abolition of assignment of benefits for auto insurance claims — a generator of fraud and litigation. One-way attorney fees allow drivers who successfully sue their insurer to recoup attorney fees – but not the other way around.

Learn More:

Florida Insurance Crisis Reforms Gain Momentum With Latest Proposal

Florida Auto Legislation, on Heels of 2022 Reforms, Suggests State Is Serious About Insurance Crisis Fix

Florida and Legal System Abuse Highlighted at JIF 2022

Fraud, Litigation Push Florida Insurance Market to Brink of Collapse

Why Personal Auto Insurance Rates Are Likely to Keep Rising

Florida’s AOB Crisis: A Social-Inflation Microcosm

Triple-I Issues Briefs:

Florida’s Homeowners Insurance Crisis

Addressing Florida’s Property/Casualty Insurance Crisis

Personal Auto Insurance Rates

Risk-Based Pricing of Insurance

Business Insurance, Business Risk, Legal Environment, Market Conditions, Workers Compensation

Group Captives Offer Cost-Sensitive Companies Opportunities to Savein Face of Inflation

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By Max Dorfman, Research Writer, Triple-I

Today’s inflationary conditions may increase interest for group captives – insurance companies owned by the organizations they insure – according to a new Triple-I Executive Brief.

Group captives recruit safety-conscious companies with better-than-average loss experience, with each member’s premium based on its own most recent five-year loss history. Additionally, the increased focus on pre-loss risk management and post-loss claims management can drive members’ premiums down even further by the second and third year of membership.

“Each owner makes a modest initial capital contribution,” states the paper, Group Captives: An Opportunity to Lower Cost of Risk. “The lines of coverage written typically are those with more predictable losses, such as workers compensation, general liability, and automobile liability and physical damage.”

With these benefits, the group captive model can help to control spiraling litigation costs. This is particularly important as attorney involvement in commercial auto claims – notably in the trucking industry – drives expensive litigation and settlement delays that inflate companies’ expenses.

Indeed, a 2020 report from the American Transportation Research Institute found that average verdicts in the U.S. trucking industry grew from approximately $2.3 million to almost $22.3 million between 2010 and 2018 – a 967 percent increase, with the potential for even higher verdicts looming.

Group captives can improve control over these costs through careful claims monitoring and review, often through providing additional layers of support that improves claims adjusting effectiveness and efficiency.

“Given that members’ premiums are derived from their own loss history, this is yet another way that they are able to lower their premiums, proactively managing and controlling the losses that do occur,” the Triple-I report mentions. “Group captives can provide a viable way to protect companies across several lines of casualty insurance. Their prominence is likely to grow as economic and litigation trends continue to increase costs.”

Most companies that join group captives are safety-conscious, despite often being entrepreneurial risk takers. “While they embrace the risk-reward trade-off, they’re not gamblers,” said Sandra Springer, SVP of Marketing for Captive Resources (CRI), a leading consultant to member-owned group captive insurance companies. 

“They are successful, financially stable, well-run companies that have confidence in their own abilities and dedication to controlling and managing risk,” Springer added. “They believe they will outperform actuarial projections, and a large percentage of them do.”

Learn More:

Backgrounder: Captives and Other Risk-Financing Options

Firm Foundation:  Captives by State

White Paper: A Comprehensive Evaluation of the Member-Owned Group Captive Option

Video: Executive Exchange: Triple-I and Captive Resources

From the Triple-I Blog:

Latest Research on Social Inflation in Commercial Auto Liability Reveals a $30 Billion Increase in Claims

How Inflation Affects P&C Rates and How It Doesn’t

Inflation Trends Shine Some Light for P&C, But Underwriting Profits Still Elude Most Lines

Monetary Policy Drives Economic Prospects; Geopolitics Limits Inflation Improvement

Auto Insurance, Highway Safety, Technology

Crash-Avoidance Features Complicate Auto Repairs But Still Are Valued

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Max Dorfman, Research Writer, Triple-I

As more new vehicles become equipped with crash-avoidance features, some owners report significant issues with the technologies after repairs, according to a recent report from the Insurance Institute of Highway Safety (IIHS).

In the survey, approximately half of those who reported an issue with equipped front crash prevention, blind-spot detection, or rearview or other visibility-enhancing cameras said at least one of those systems presented problems after the repair job was completed. 

Nevertheless, many owners remained eager to have a vehicle with these features and were pleased with the out-of-pocket cost, according to Alexandra Mueller, IIHS senior research scientist.

“These technologies have been proven to reduce crashes and related injuries,” Mueller said. “Our goal is that they continue to deliver those benefits after repairs and for owners to be confident that they’re working properly.”

Still, as problems with these technologies persist, the study notes that it is important to track repair issues to further the adoption of crash avoidance features. IIHS research has shown that front-crash prevention, blind-spot detection, and rearview cameras all substantially reduce the types of crashes they are designed to address. For example, IIHS said, automatic emergency braking reduces police-reported rear-end crashes by 50 percent.

An analysis conducted by the IIHS-affiliated Highway Loss Data Institute (HLDI) showed the reduction in insurance claims associated with Subaru and Honda crash-avoidance systems remained essentially constant, even in vehicles more than five years old. But repairs can make it necessary to calibrate the cameras and sensors that the features rely on to work properly, making repairs complicated and costly.

For example, a simple windshield replacement can cost as little as $250, while a separate HLDI study found vehicles equipped with front crash prevention were much more likely to have glass claims of $1,000 or more. Much of that higher cost is likely related to calibration.

The new IIHS study found that owners often had more than one reason requiring repairs to these safety features. Most had received a vehicle recall or service bulletin about their feature, but that was rarely the sole reason they brought their vehicles in for service or repair.

“Other common reasons — which were not mutually exclusive — included windshield replacement, crash damage, a recommendation from the dealership or repair shop, and a warning light or error message from the vehicle itself,” according to the study.

Repair difficulties could motivate drivers to turn off crash avoidance features, potentially making collisions more likely.  But, despite the post-repair issues, the study found that slightly more than 5 percent of owners would opt not to purchase another vehicle with the repaired feature. As reckless driving and traffic fatalities continue to rise, advanced driver-assistance systems will only become more important for the roadway safety, necessitating reliable technology.  

Learn More:

Personal Auto Insurers’ Losses Keep Rising Due to Multiple Factors

IRC Releases State Auto Insurance Affordability Rankings

IRC Study: Public Perceives Impact of Litigation on Auto Insurance Claims

Why Personal Auto Insurance Rates Are Likely to Keep Rising

Acting to Curb Rising Auto Fatalities

Insurers and the Economy, Legal Environment, Regulation

La. Insurance Regulator Issues Cease & Desist Order to Texas Law Firm

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Louisiana Insurance Commissioner Jim Donelon last week issued a cease-and-desist order against a Houston-based law firm, accusing it of fraud involving potentially hundreds of hurricane-related claims in his state.

“The size and scope of McClenny, Moseley & Associates’ illegal insurance scheme is like nothing I’ve seen before,” Donelon said in a press release. “It’s rare for the department to issue regulatory actions against entities we don’t regulate, but in this case, the order is necessary to protect policyholders from the firm’s fraudulent insurance activity.”

According to Donelon, the law firm filed more than 1,500 hurricane claim lawsuits in Louisiana over the span of three months last year.

The Louisiana property insurance market has been deteriorating since the state was hit by record hurricane activity in 2020 and 2021, to the extent that 11 insurers that write homeowners coverage in Louisiana were declared insolvent between July 2021 and September 2022. Insurers have paid out more than $23 billion in insured losses from over 800,000 claims filed from the two years of heavy hurricane activity. The largest property-loss events were Hurricane Laura (2020) and Hurricane Ida (2021).

In addition to driving insurer insolvencies, the growing losses have caused a dozen insurers to withdraw from the market and more than 50 to stop writing new business in hurricane-prone parishes.

Louisiana’s troubles parallel those of another coastal state, Florida, but there are significant differences. Florida’s problems are largely rooted in decades of legal system abuse and fraud, whereas Louisiana’s have had more to do with insurers being undercapitalized and not having enough reinsurance coverage to withstand the claims incurred during the record-setting hurricane seasons of 2020 and 2021. In general, Louisiana insurers have not experienced the level of excessive litigation that Florida insurers have faced.

“It now appears some trial attorneys are trying to take a page out of the Florida playbook by engaging in litigation abuse against Louisiana property insurers,” said Triple-I Director of Corporate Communications Mark Friedlander. “We commend Commissioner Donelon for quickly addressing these fraudulent practices.”

According to reporting by the Times Picayune/New Orleans Advocate, an investigation by the Louisiana Department of Insurance found the Houston-based firm engaged in insurance fraud and unfair trade practices through Alabama-based Apex Roofing and Restoration and has faced accusations of potentially criminal behavior in courts across the state. In one such case, the paper reported, a woman testified that she had never intended to retain the law firm when she hired the roofing company to fix her hurricane-damaged roof.

“The firm told her insurance company that it represented her and even filed a lawsuit on her behalf, though she said she was unaware of it,” the paper said. 

Legal system abuse is a pervasive problem that contributes to higher costs for insurers and policyholders nationwide, as well as to rising costs generally, given the importance of insurance in development and commerce. Triple-I is committed to informing the discussion around this critical issue.

Learn More:

Hurricanes Drive Louisiana Insured Losses, Insurer Insolvencies

Florida Insurance Crisis Reforms Gain Momentum With Latest Proposal

Florida Auto Legislation, on Heels Of 2022 Reforms, Suggests State Is Serious About Insurance Crisis Fix

Florida And Legal System Abuse Highlighted at JIF 2022

IRC Study: Public Perceives Impact of Litigation on Auto Insurance Claims

A Piecemeal Approach Toward Transparency in Litigation Finance

Auto Insurance, Homeowners Insurance, Insurers and the Economy, Legal Environment

Florida Insurance Crisis Reforms Gain Momentum With Latest Proposal

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Florida Gov. Ron DeSantis’s proposed insurance fraud and legal system abuse reforms, announced this week for consideration during the legislative session that begins in March, would build on measures approved in the closing weeks of 2022 and go a long way toward fixing the state’s insurance crisis.

Legislation passed during the 2022 special session eliminated one-way attorney fees and assignment of benefits (AOB) arrangements for property insurance claims. Gov. DeSantis’s proposal would go further, eliminating these mechanisms and “attorney fee multipliers” for all lines of insurance.

“For decades, Florida has been considered a judicial hellhole due to excessive litigation and a legal system that benefitted the lawyers more than people who are injured,” DeSantis said in his announcement. “We are now working on legal reform that is more in line with the rest of the country and that will bring more businesses and jobs to Florida.”

Before the 2022 reforms, state law required insurers to pay the fees of homeowners insurance policyholders who successfully sued over claims, while shielding policyholders from paying insurers’ attorney fees when the policyholders lose. The legislation also eliminated AOBs – agreements in which property owners sign over their claims to contractors, who then work with insurers.

AOBs are a standard practice in insurance, but in Florida this consumer-friendly convenience has long served as a magnet for fraud. The state’s legal environment – including some of the most generous attorney-fee mechanisms in the country – has encouraged vendors and their attorneys to solicit unwarranted AOBs from tens of thousands of Floridians, conduct unnecessary or unnecessarily expensive work, then sue insurers that deny or dispute the claims.

As a result, Florida accounts for nearly 80 percent of the nation’s homeowners’ insurance lawsuits, but only 9 percent of claims, according to the state’s Office of Insurance Regulation.

Eliminating these two mechanisms for property claims addresses much of the insurance fraud in the state. Eliminating them for all lines would be a promising sign that the state is truly committed to addressing the root causes of the crisis.

Florida’s insurance crisis didn’t happen overnight, and it will take years for the impacts of fraud and legal system abuse to be wrung out of the system.  Policyholders won’t see premium benefits any time soon. Job 1 is to “stop the bleeding” as insurers fail, leave the state, or stop writing critical personal lines coverages like auto and homeowners.

Triple-I has published a new Issues Brief about the crisis and the state’s efforts to repair it.

Learn More:

Florida Auto Legislation, on Heels of 2022 Reforms, Suggests State Is Serious About Insurance Crisis Fix

Florida and Legal System Abuse Highlighted at JIF 2022

Fraud, Litigation Push Florida Insurance Market to Brink of Collapse

Florida Dropped From 2020 “Judicial Hellholes” List

Florida’s AOB Crisis: A Social-Inflation Microcosm