Taming Florida with data
Increased insight into the drivers of insurance costs in Florida has helped prompt regulatory reform, helping restore stability.
Could data be the solution for Florida’s troubled insurance market? That’s the question posed by Michael Yaworsky, Commissioner at the Florida Office of Insurance Regulation.
Speaking at Intelligent Insurer’s Re/insurance Outlook USA 2024 conference, taking place in New York today (May 2), Yaworsky outlined the state’s turbulent history since Hurricane Andrew first struck and precipitated its first insurance crisis over 30 years ago, in 1992.
Since then, it’s seen frequent innovations to address its unique challenges. That included the first and still only state-level hurricane catastrophe fund, created following Andrew, as a keel to help stabilise the cost of reinsurance. It also included the country’s first and only public model for assessing hurricane risk.
Following more populist interventions, however, the situation worsened in the decade leading up to 2016/17. From then, the market saw the cost of reinsurance surge, litigation increase, and natural catastrophe activity worsen.
By 2022, costs were exorbitant, and litigation was out of control.
“It was quite astounding to look at,” said Yaworsky. The state became the first to gather annual granular data on every property claim closed. Its first data showed that, in 2019, Florida accounted for eight per cent of all property claims in the United States but 76 per cent of litigated claims.
“It was an astounding number.” Further analysis showed that in the tri-county area that takes in Miami-Dade, Broward and Palm Beach counties – an area that has not had a direct impact from a storm in over a decade –over 27 per cent of claims were litigated.
“What insurer would want to write in those counties,” he asked.
This data helped make the case for changes. These included revocation of the One-Way Attorney's Fees statute, which massively increased the risks of insurers being required to pay litigants legal fees. Data showed average loss adjusted expenses of ligated claims were eight times those of non-litigated claims.
“The costs this sucked out of fortis fragile market was exorbitant.”
Already this seems to be lowering the propensity to litigate. Catastrophe claims are falling, new capital is entering, and rate stabilisation is being seen across the state.
Things are, said Yaworsky, moving in the right direction – and that direction is data-driven. “Florida has probably invested more than any other state in the data it collects and the analysis it does, and that's going to continue to grow.”
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