Florida’s homeowners insurance market has long been troubled by soaring premiums and rampant litigation, creating a crisis that threatened the stability of the entire system. However, recent legislative reforms are beginning to show positive results, offering much-needed relief to homeowners across the state.
In 2022, Florida accounted for a staggering 71% of the nation’s homeowners claim-related litigation, despite representing only 15% of total claims. This disproportionate litigation burden was exacerbated by Hurricane Ian, which struck Florida as a Category 4 storm, becoming the second largest on record in terms of insured losses. The extraordinary litigation costs that followed contributed to the insolvency of nearly a dozen insurance carriers over a couple of years, leaving hundreds of thousands of Floridians without homeowners insurance protection and exposing the fragility of the state’s insurance market.
Recognizing the urgent need for reform, the Florida Legislature enacted significant changes aimed at curbing the abuse of assignment of benefits (AOB), limiting bad-faith claims, and reducing excessive legal fees. Key measures included eliminating one-way attorney fees in property insurance litigation, prohibiting third parties from taking AOBs for property claims, and ensuring a more transparent and efficient claims process. These changes were designed to promote more efficient and less costly alternatives to litigation.
Early signs in 2023 indicate that the reforms are beginning to deliver the intended benefits. Florida’s defense and cost-containment expense (DCCE) ratio—a key measure of the impact of litigation—fell dramatically from 8.4 in 2022 to 3.1 in 2023. In dollar terms, legal defense costs in the state dropped from $1.6 billion in 2022 to $739 million in 2023, a significant decline that underscores the effectiveness of the reforms.
As a result of these changes, the average premium increase in 2023 was much lower than expected, and projections for 2024 are even more favorable. The Florida Office of Insurance Regulation (OIR) reported that average premium rate filings in the private market are running below 2% year-to-date in 2024. Moreover, eight domestic carriers have filed for rate decreases, and another 10 have filed for no increase, signaling market stabilization.
The improved environment has also attracted new insurers to Florida, with eight property insurers approved to enter the market, and more expected to follow. This influx of competition is vital for providing Floridians with more options and further driving down premiums.
Florida’s homeowners insurance market, once on the brink of collapse, is showing signs of recovery thanks to the state’s tort reform. Homeowners are finally beginning to see the benefits in the form of more manageable premiums and a more stable insurance landscape. The early success of these reforms demonstrates that Florida is on the right path, fostering cautious optimism for the future of the industry in the state.
