Florida reforms slash insurance carrier defence costs in 2023
Florida homeowner litigation reforms have already taken a major dent out of carrier defence costs, bringing the cost line down by over half in 2023 to a level not seen since 2017.
Direct cost and containment (DCC) expense at a group of 47 specialist insurers focused on Florida personal property fell nearly 53% in 2023 to $307 million, analysts at AM Best said of data culled from annual regulatory filings, excluding local units of national carriers and the state residual carrier Citizens.
“While still early, a downward trend has been observed, indicating the reform has positively impacted results,” authors wrote of what was nonetheless the first downward move after three years of increase that had grown the cost line by 71.8%.
But it's a big downward move. The 2023 tally is the lowest nominal reading since 2017 and represents only the second decline over the past decade, the data set indicated.
AM Best provided no calculation of the change in ratio points, but did note that the 2022 peak in the cost line had amounted to 8.4% of direct written premium (not net earned), more than twice the 3.6% in Louisiana, the state with the next biggest proportional problem.
But the relative change is magnified by coverage trends at the state insurer of last resort, Citizens, which is excluded from the data. Citizens was taking policies from the private market through 2022 as DCC costs peaked for private carriers, then started giving policies back in 2023, simultaneous with the reduction in private-sector DCC costs.
Litigation reforms “have attracted new participants and created more capacity,” authors said of the kick-on benefit from legislation action.
Key legislation enacted in December 2022 eliminated assignment of benefits clauses for lawsuits as well as the one-way attorney fee provisions that protected plaintiffs from legal fees. Combined, critics claimed, contractors and lawyers were free to flood courthouses.
Additional reforms then and since have altered the time window for court moves, tweaked deductible rules, added mitigation programs and more.
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