Terms to Know Before Florida Special Session

Tallahassee, Florida — State lawmakers will hold a special session Monday in Tallahassee aimed at reforming the state’s insurance industry, which faces a slew of issues affecting the bottom line of many Floridians.

For months, News 6 has been watching for homeowners’ premiums to rise, others’ policies to fall and insurers to leave the state altogether.

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After failing to pass any legislation during the state’s 60-day regular session, lawmakers called for a solution to what some saw as a “market crash” and a “dire situation,” prompting Gov. Announcement at the meeting.

Here are 4 key points from the announcement:

1. Florida’s insurance industry is being inundated with lawsuits.quote Insurance Regulatory Office, the announcement said Florida accounted for 79 percent of the nation’s homeowners insurance lawsuits and only 9 percent of the nation’s homeowners insurance claims. Florida residents, in turn, are feeling the pinch of lawsuits amid rising premiums.

2. For the second year in a row, Florida’s insurance industry has experienced annual net underwriting losses of more than $1 billion.

3. The governor’s announcement in April said that in the first three months, the coverage of three Florida insurers had become insolvent and in liquidation or recovery, meaning thousands of policyholders in limited Seek new coverage within Select.

4. With so many policies being cancelled, homeowners are turning to citizen property insurance. Citizens Insurance is state-backed and should be the insurer of last resort. Citizen’s has grown its policies by nearly 400,000 since the start of 2020 and is expected to surpass 1 million by the end of the year, the announcement said.

While millions of Floridians own homes, many may not fully understand the inner workings of property insurance and how insurance-related terms and trends affect them as policyholders.

“I talk to consumers every day,” explains Florida-based insurance consumer advocate Tasha Carter. “For the typical consumer, they’re not familiar with insurance. For them, it’s a very complex subject.”

Carter, appointed by the state’s chief financial officer, is tasked with identifying key insurance issues facing consumers and proposing solutions.

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We asked Carter to help further explain some of the key terms we may hear during the special session and how it affects you.

Premium:

This is the amount the policyholder pays the insurance company to provide them with coverage. When you hear the term “increased premium,” homeowners have to pay more for the policy than they used to pay.

Covered Loss:

In this case, the insurance company pays more than the premiums they collect for a certain period of time.

Insolvent:

When an insurance company goes bankrupt, it means the company can no longer pay its financial obligations. The next issue coincides with this topic.

Liquidation:

According to Carter, a court order must be issued to find a company insolvent and order the company to go into receivership or liquidation. When this happens, the Department of Financial Services (DFS) steps in and takes over the insurance company. Carter explained how DFS basically takes assets and liquidates them in an attempt to pay off any debts to the company. In addition, the Florida Insurance Guarantee Association is involved.

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Florida Insurance Guarantee Association (FIGA):

Carter explained that the group aims to provide a safety net for policyholders whose insurance companies have gone bankrupt. Once a company is deemed insolvent and placed into receivership or liquidation by a court order, the Department of Financial Services steps in and takes over the company and transfers all information related to the claim to FIGA, she said. FIGA reviews claims and determines resolution of those claims based on available funds.

“At that point, FIGA will step in and basically take the insurance company’s position and pay those policyholders,” Carter said.

litigation:

Litigation is the process of taking legal action. So why do we hear so many lawsuits when it comes to property insurance? There seem to be several factors. In some cases, Carter explained that insurers did not pay claims fairly to homeowners, who felt their only option was to sue.

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Carter also noted an increase in insurance fraud, which may include companies soliciting homeowners to file claims.

“Many of the claims made included inflated invoices or inflated repair estimates,” Carter said. “What happens when these types of claims are brought to the insurance company, the insurance company is either in a situation where they have to try to negotiate and resolve these claims, or the insurance company takes the claimant to court to be able to protect themselves from having to pay for this exaggeration , exaggerated or frivolous claims.”

Carter explained that they also saw professionals use a certain strategy to control claims, which led us into the next term.

Allocation of Benefits (AOB):

This is a legal contract that allows policyholders to transfer their policy rights to a third party. Carter explained that it is often used for health insurance. When you have a medical appointment, you pay the copay, get tested and leave.

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“The reason you don’t have to file a claim with your health insurer is that at some point you signed an AOB that allows or authorizes your healthcare provider to file a claim directly with your health insurer, and directly from your The health department charges the insurance company without your involvement,” Carter shared.

In this case, the distribution of benefits works well and the patient does not have to go through the process of submitting a claim to get paid. However, in the case of property insurance, Carter explained that some unscrupulous companies have begun to misuse and abuse legal tools to control claims.

AOB bundle:

Carter called this a recent practice. This happens when a homeowner signs a benefit distribution to a professional but then the professional transfers it to another third party without signing a new AOB.

Insurance Fraud:

There are certain types of conduct that are considered insurance fraud. An example would be someone making a claim for non-existent damages or damages beyond existing damages. Involves criminal and civil penalties.

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Deductible:

The deductible is the amount the policyholder is responsible for paying before the insurance company pays the claim. Deductibles only come into play after a claim is made. If the claimed amount exceeds your deductible, the insurance company will write a check.

Reinsurance:

Reinsurance is insurance that insurance companies buy to help protect them by ensuring they can pay claims after a disaster. Carter explained that reinsurance rates increased by an average of 54% last year. According to Carter, when reinsurance rates increase, insurers often pass the extra cost on to policyholders.

insurance rate:

We keep hearing about rate hikes, but what does that mean? According to certain parts of the state, rates may be similar, Carter said. For example, your zip code may have a certain rate. So, location plays an important role, but also influences certain characteristics of your home. That’s when underwriting comes into play, Carter said. You provide information about your family and they plug in all the factors and create an algorithm.

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“The interest rate can be directly related to the amount of risk that the insurance company thinks to insure your home,” Carter said.

The special session will take place a few days before the start of the 2022 Atlantic hurricane season.

Here are some legislative actions to consider.