Can big insurers be forced to sell auto and home in Florida?

Every so often, a beleaguered Florida consumer proposes a way to fix Florida’s property insurance availability problem:

The state legislature should require big national insurance companies that bombard the state with auto insurance ads to also sell homeowners insurance.

After all, they ask, why should the big companies be allowed to cherry-pick the easier and most profitable motor vehicle risks while avoiding potentially costlier property risks?

Ed Huber, a Boynton Beach resident, wrote to the Palm Beach Post in 2013 that “Any insurer that is a national/international company will not be allowed to do business in any state unless all of its coverages are available in that state … To exclude some coverage because of higher risk could not happen.”

Turns out they weren’t the first to come up with that idea. In 2007, such a law was enacted during a special legislative session on homeowner insurance convened by newly elected Governor Charlie Crist. And the new law was apparently forgotten soon afterward, with little discussion or evident enforcement.

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In his 2006 campaign for governor, Crist criticized big insurers for “cherry picking” auto policies while dropping homeowner policies after unusually active hurricane seasons in 2004 and 2005. Florida subsidiaries of Nationwide and Allstate announced they had stopped writing new property insurance business in Florida and were non-renewing tens of thousands of existing policies.

The crisis then resembled the one facing Florida now: skyrocketing rates, companies pulling out of the state, and more than 1 million stranded homeowners forced into state-run Citizens Property Insurance Corp.

Crist argued that the solution included a law banning “cherry picking” by large insurers that sell home, auto and other products.

“I know in my heart that companies who would write property insurance in other states but not Florida, yet benefit enormously from writing auto policies in our state, need to stop discriminating against Floridians,” Crist said after winning the election, according to a 2007 story in the Palm Beach Post.

Almost immediately after taking office, he convened a special legislative session to address insurance costs and availability. Lawmakers passed measures expanding windstorm mitigation credits and stronger building codes, along with immediate 10% rate cuts for Citizens customers and a short-term freeze of Citizens rates. They also provided small insurers access to cheaper reinsurance though the Hurricane Catastrophe Fund, as long as they agreed to pass some savings along to customers.

Additionally, they passed a version of Crist’s cherry-picking ban, with a provision barring companies from selling auto insurance in Florida if they sell homeowner insurance in any other state but not in Florida. Insurers with affiliates that sell homeowner insurance in Florida were exempted.

But the legislature declined to enact another Crist proposal that would have given the provision teeth: He wanted to prohibit large insurers from concentrating their business into spinoff companies — or affiliates — that were allowed to price their policies based solely on loss risks in Florida, and not their entire books of national business.

After Hurricane Andrew pulverized parts of southwest Miami-Dade County in 1992, the state allowed the large companies to spin off Florida-based subsidiaries in hopes of persuading the insurers not to leave the state entirely. State Farm created State Farm Florida Insurance Company. Allstate had Allstate Floridian (later Castle Key). Nationwide had Nationwide Insurance Co. of Florida.

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Because of those Florida-only companies, the affiliate exception in Crist’s cherry-picking provision would have protected those large carriers from the possibility of losing their licenses to write auto insurance in Florida.

The provision contained no requirement that companies selling auto insurance write a minimum number of homeowner policies, said Mike Fasano, a former legislator from the Tampa Bay area who later tried unsuccessfully to strengthen the law to one that required insurers to sell everything in Florida that they sell elsewhere in the country.

The provision that was enacted “doesn’t say how many policies they have to write,” Fasano said in a recent interview. “It allowed them to say, ‘OK, we’re writing 10 policies in Hardee County. Therefore we’re writing both.’ It definitely was watered down. It should have said, ‘If you write 1,000 auto policies, then you should write 1,000 homeowner insurance policies’.”

That’s closer to a suggestion by Hollywood resident Pat Crowdery in a May 2021 email to the South Florida Sun Sentinel addressing insurer pullouts and rising rates. “If our state government did its job, they could pass legislation that would require any company that wants to write auto policies in the state to also take a certain percentage of homeowner policies.”

She noted that the idea might be complicated to implement “but doable.” The big national companies “all spend lots of advertising dollars trying to lure consumers into purchasing an auto policy from them while they shirk their responsibilities to the state by not offering home policies to those same consumers,” she said. “It’s immoral to put this current crisis on the middle class.”

Fasano lamented that the legislature “never came down on these insurance companies long ago, especially the big boys.” He sympathizes with consumers “who see the State Farms and the Allstates reporting billions in profits each year while their rates go up because their companies in Florida are crying poor mouth. You think, ‘What is the state doing for these consumers?’”

Most recently, the legislature held another special insurance session and enacted a package of reforms that lawmakers hope will eventually reduce high claims costs, stabilize insurance rates and encourage national companies to offer more policies in the state. Time will tell whether the reforms will be enough to lure more insurers back to the Florida market.

John Rollins, former chief risk officer for Citizens and current director of ventures, at Texas-based Evans Insurance Group, called Crist’s cherry picking ban a “showpiece provision” and said he was unaware of any enforcement activity.

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Asked to comment on whether the “cherry picking” provision had any impact on Florida’s insurance market, Crist’s campaign issued a statement that sidestepped the question and defended the package of reforms.

“Ron DeSantis is the worst property insurance governor in Florida history,” the statement said. “We are in the middle of a hurricane season and under Ron DeSantis, homeowners are getting dropped left and right. I am proud of the law I signed as governor in 2007 that stabilized the insurance market, held companies accountable, and lowered rates 10 percent.

“But not only do we need strong legislation that will protect Floridians, we need a governor who wants to enforce it. When I’m governor, I’ll be on the side of the people, not the insurance companies.”

The Florida Office of Insurance Regulation did not respond to questions seeking to know how or even whether the provision is enforced when the office reviews auto insurers’ requests for approval of rate increases or coverage changes. A search of the statute number on the office’s website yields no results.

Also unknown is how the provision could affect a large auto insurer like Progressive, which earlier this year said it stopped writing new homeowner policies in Florida and would not be renewing existing policies.

Then there’s Geico, which, according to the price-comparison website Value Penguin, bundles home insurance with its auto insurance policies but only sells home insurance underwritten by third party companies.

A comparison of publicly accessible insurer filings to the Office of Insurance Regulation’s website turned up a handful of auto insurers that advertise homeowner policies but have not requested approval of homeowner insurance rates or rules in Florida since May 2018.

One of those companies reported insuring nearly 190,000 motor vehicles this year in Florida. It sells homeowner insurance in four other states but only sells auto insurance in Florida, according to a member of the company’s marketing team reached by phone.

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A search of filings to the Office of Insurance Regulation turned up no home insurance rate or form filings by the company.

If the provision has not been enforced, perhaps it’s because insurance regulators know it would be challenged in court, Fasano said.

Some insurance industry insiders say it’s ludicrous to consider forcing companies to sell specific product lines in specific states.

“Forcing auto insurers to offer home insurance in Florida would most likely drive these companies out of the state,” said Mark Friedlander, director of communications for the Insurance Information Institute, a consumer-focused website funded by national insurance companies. “Also, we have some carriers that only write commercial lines coverages in Florida but personal lines in other states. Would you also force these companies to write home and auto as well? Another way to drive insurers out of the state.”

Friedlander also disputed the idea that auto insurance companies are awash in cash, saying profitability of the segment is deteriorating due to increasing claim severity and inflationary impacts on replacement costs.

Stacey Giulianti, chief legal officer at Boca Raton-based Florida Peninsula Insurance Co., said companies cannot commingle funds from separate lines of insurance and cannot be expected to offer all types of insurance everywhere.

“Every line of insurance has to stand on its own in terms of solvency,” he said. “You can’t use money from your auto carrier to subsidize homeowners insurance rates or vice versa. That’s simply not permitted.

“Moreover, shouldn’t companies be permitted to write how and where they want? Government shouldn’t force someone to write even one policy if it’s not in their Florida wheelhouse.”

Giulianti and Friedlander each said that insurers will be reluctant to offer homeowners policies in the state until it becomes possible to turn a profit consistently. As a whole, the property insurance industry in Florida has lost money in each of the past five years, according to data submitted to the National Association of Insurance Commissioners.

The situation won’t improve “until the state legislature takes strong actions to disincentivize the endless flow of lawsuits against property insurers,” Friedlander said.

Giulianti said that until the Florida market makes financial sense, “all the insurance companies in the world won’t make a bit of difference.”

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at rhurtibise@sunsentinel.com.