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Fla.-Owned Insurer’s CEO Cites ‘Sea of Red Ink’

By Jim Saunders and Tom Urban

The head of Citizens Property Insurance calls losses among all state insurers “absolutely staggering.” He blames the marketplace itself, saying it impacts every company.

TALLAHASSEE – Pointing to a “sea of red ink,” the head of the Florida-backed Citizens Property Insurance Corp. described a private insurance industry in the state that is losing gobs of money while homeowners face soaring rates and trouble finding coverage.

“The consistency of loss across the entire marketplace is absolutely staggering,” Citizens President and CEO Barry Gilway told the Florida Legislature’s House Insurance & Banking Subcommittee. “It’s not a decision that one or two companies are making. The reality is that what is occurring in the marketplace is impacting every single company in the market.”

Gilway went before the panel less than six months after lawmakers passed a measure (SB 76) to try to bolster the property-insurance system. But as evidence of continuing problems, the number of policies written by Citizens has soared to more than 700,000 and is expected to climb above 1 million next year, as more homeowners turn to it for coverage.

While Gilway’s presentation focused heavily on financial problems in the insurance industry, Rep. Matt Willhite, D-Wellington, asked about the impact on homeowners, citing a disabled veteran who got hit with a large rate increase.

“Where is the breaking point for the disabled military veteran, who is on a fixed income, that can’t insure their home when they are at a breaking point themselves?” Willhite asked.

With lawmakers preparing to start the 2022 legislative session in January, the meeting Wednesday did not include detailed discussions of proposals to address the problems. As an example of one idea, Rep. Tom Fabricio, R-Miramar, floated the possibility of more broadly opening the market to what are known as surplus-lines carriers, which don’t face the same regulatory oversight as more-traditional insurers.

But House Minority Co-leader Evan Jenne, D-Dania Beach, pointed to numerous changes in the property-insurance system over the past two decades and questioned whether the state needs a new approach.

“Should we be moving in a completely different direction?” Jenne asked. “What we have been trying to do, a lot of it has been built on one another. Yet we continuously find the same results and find ourselves in these sticky situations. Should we be looking at something new?”

Citizens was originally created as an insurer of last resort, but it has seen huge growth since mid-2020 as private insurers have raised rates and reduced policies to try to stem financial losses. Citizens added nearly 22,000 policies last month and had 708,919 policies as of Sept. 30, according to data posted on its website. It had gained almost 200,000 policies since Sept. 30, 2020, when it totaled 511,055 policies, and Gilway said recently that an initial forecast for 2022 includes 1 million to 1.3 million policies.

Many lawmakers and state leaders have long sought to move homeowners from Citizens into the private market, largely because of concerns about financial risks for taxpayers if Florida gets hit with a major hurricane.

But along with private insurers reducing the amount of coverage they will write because of financial problems, Gilway said Citizens often has cheaper rates than private companies. In addition, many homeowners in areas such as Southeast Florida rely on Citizens because they have few other options for coverage.

The legislation passed in April took a series of steps, including trying to help curb lawsuits against insurers and gradually raising a cap on rate increases for Citizens customers.

However, one key part of the bill – designed to prevent contractors from soliciting homeowners to file roof-damage claims – was blocked by a federal judge because of First Amendment concerns. Insurers contend they have faced soaring costs because of unnecessary, if not fraudulent, roof-damage claims.

Gilway’s comments Wednesday, in some ways, echoed state Insurance Commissioner David Altmaier, who last month told a Senate committee that the condition of the property-insurance market was “dire.”

Gilway, who said he has been in the insurance business for 51 years, used graphics to show lawmakers that dozens of private insurers have sustained net-income losses in recent years. Among the factors he cited were litigation costs and the costs of reinsurance, which is essentially insurance that insurers buy as a backup.

Gilway also said Florida’s Office of Insurance Regulation in 2020 received 105 rate filings from insurers that sought increases of 10% or more – and customers of some companies have seen rate increases of more than 25% in 2020 and 2021.

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How Many Offers Did the Typical 2021 Buyer Make? Two

While stories about multiple offers and foregone inspections are pervasive, a study found that most buyers won by their second bid and 88% had a home inspection.

JACKSONVILLE, Fla. – While more frustrated buyers tried to make their offers seller-friendly so far this year, a Zillow study suggests that it’s not as pervasive as many of the media reports may indicate.

According to the research, the typical U.S. homebuyer nationwide made just two offers so far in 2021 before one was accepted. And while some buyers have decided to forego a home inspection to make their offer more palatable to a seller, 88% of buyers had an inspection done, despite reports that homebuyers were waiving inspections due to the hot housing market.

Before 2021, though, homebuyers had to submit a median of one offer.

The share of first-time homebuyers also dropped in 2021 to 37%, down from 43% in 2020.

The research also found that fewer buyers opted to buy a home sight unseen. Researchers found that virtual home tours proliferated, but nearly all buyers still took a private tour of a home before putting in an offer, with typical homebuyers going on three private tours before making an offer. Only 5% of buyers skipped private tours entirely.

Even though most buyers wanted an in-person home tour before making an offer, however, they still liked the virtual tours – 68% agreed that virtual tours helped them get a better feel for homes than just photos. About 61% wished more listings had 3D tours, and 61% said they wanted to schedule in-person tools online.

On questions about homebuyers’ motives, about 60% said low mortgage interest rates influenced their decision, and about 50% said they had enough saved up for a down payment.

Source: Jacksonville Business Journal (10/11/21) Medici, Andy

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