Florida vs. California Insurance, Round 2

Rates fall in the Sunshine State after DeSantis’s reforms, but they soar on the left coast

WSJ editorial. Excerpts:

"Democratic insurance regulators in the Golden State for years have suppressed rates even as home values have ballooned. State Farm, California’s largest fire insurer, earlier this month said that it has paid $1.26 in claims for every $1 it has collected in premiums over the last nine years, resulting in $5 billion in underwriting losses.

Progressives blame poor underwriting, but California until recently was the only state to prohibit insurers from pricing re-insurance costs into premiums and using catastrophe models to adjust rates. The state also bars insurers from dropping policies in areas affected by fires for a year thereafter, which has made it hard to limit exposure.

Regulators typically take more than a year to approve rate increases—and usually for less than insurers request—because they first solicit feedback from “consumer advocates”—i.e., liberal outfits. State Farm still hasn’t received approval for a 30% rate increase that it asked for last June and says that it isn’t meeting capital requirements."

"By contrast, Mr. DeSantis spearheaded a series of litigation reforms in 2022 and 2023 that have headed off an insurance disaster. Insurers had been raising rates by double digits annually and fleeing the market because of rampant lawsuit abuse, which ballooned the liabilities at the Florida insurer of last resort, Citizens Property.

Mr. DeSantis this month said 11 new insurers have entered the market over the last two years as a result of tort reforms. Since 2022 more than 477,000 policies have shifted from Citizens Property back to the private market, which will reduce the risk of a taxpayer bailout if there’s a bad storm.

Some criticized our January editorial on Florida’s reforms because home insurance rates rose 102% between 2020 and 2023. But that was before most reforms took effect and was the reason lawmakers undertook them. Now rates are coming down as litigation abuse abates.

Citizens now plans to cut rates on average by 5.6% for 20% of policyholders. Four of the state’s top 10 carriers have filed for rate decreases. The Governor said Florida had the lowest average homeowners’ premium increases in the nation this past year—just 1%. Homeowners in many other states have experienced increases of 20% or more."