Florida Faces Insurance Crisis: Proposed Bills and Citizens Property Insurance Struggles.

As Florida enters its 2025 legislative session, insurance remains one of the state’s most pressing issues. Lawmakers are introducing multiple bills to address the growing concerns surrounding homeowners' insurance premiums, the no-fault auto insurance system, and the financial stability of Citizens Property Insurance. With escalating costs and a fragile market, the state's insurance landscape is in turmoil.

Citizens Property Insurance: A Growing Concern

Citizens Property Insurance, once designed as a last-resort insurer for homeowners unable to obtain coverage from private carriers, is facing significant financial pressure.

Despite efforts to reduce its policyholder base, the insurer now holds nearly 943,000 policies, prompting fears that it may struggle to meet claims in the event of a major disaster.

For many residents, Citizens' rate hikes are a hard pill to swallow. While the state has suggested reductions in overall premiums, Citizens plans to increase rates by an average of 8.6% in 2025. Notably, non-primary residences and mobile homes will see the highest increases.

Legislative Proposals to Address Market Instability

Lawmakers, including Senator Blaise Ingoglia, are actively working on a variety of insurance reform proposals. These bills aim to stabilize the insurance market, protect consumers, and hold insurers accountable.

1. SB 1740: This bill proposes that insurers seeking approval to operate in Florida must maintain an additional $35 million in reserves. It also seeks to prevent executives and attorneys from leading failed insurance companies for five years after a company goes insolvent.

2. SJR 1190: This proposal would offer property tax freezes for homeowners who take steps to elevate their homes or invest in hurricane and flood mitigation measures. The measure, if approved by the legislature and voters, would provide significant tax incentives to make homes more resilient to storms.

3. SB 1192: This bill ensures that property tax benefits for resilient homeowners remain in place for 20 years, providing long-term financial relief for those making mitigation improvements.

Increased Transparency and Accountability

Lawmakers are also pushing for greater transparency from insurers. Proposals like SB 1656 and HB 1429 would require insurers to disclose payments made to affiliate companies, as well as report on how internal costs—such as litigation expenses and reinsurance—impact consumer premiums.

Senator Don Gaetz is also championing SB 554, which demands detailed reports on executive compensation and financial ties between insurers and their affiliates.

A particularly notable push comes from Senator Gaetz and Representative Alex Andrade, who are working to reinstate the one-way attorney fees system. This system would allow policyholders to recover legal costs if they successfully sue an insurer—a system that was changed in 2023, requiring both sides to cover their own legal expenses.

No-Fault Auto Insurance: Another Controversial Issue

Another major issue on the table is the no-fault auto insurance system. Critics argue that Florida’s current law—requiring drivers to carry $10,000 in personal injury protection (PIP), regardless of fault—has contributed to the state’s high auto insurance premiums. Florida currently has some of the highest premiums in the country, averaging over $1,500 per year.

Senator Erin Grall’s SB 1256 and Representative Danny Alvarez’s HB 1181 propose replacing PIP with a requirement for drivers to carry bodily injury coverage. This would shift the burden of medical costs from PIP to bodily injury liability, a change that aims to lower premiums over time by reducing inefficiencies in the current system.

The opponents of the repeal, such as the Florida Justice Reform Institute, argue that the PIP system should not be changed without further data collection. They advocate for waiting at least three more years to fully assess the effects of recent reforms intended to reduce litigation costs.

The Financial Stability of Citizens Insurance

Despite the proposed reforms, Citizens Property Insurance remains in a vulnerable position. The company, which is the state’s largest property insurer, has struggled with rising costs due to frequent hurricanes, increased litigation, and high construction costs.

This has led to concerns that Citizens may not have the financial resources to handle claims after a major disaster. Governor Ron DeSantis has acknowledged that Citizens is not solvent and that the insurer may face serious challenges if a significant storm strikes.

The growing number of policies under Citizens, paired with rising premiums, has exacerbated the problem, and lawmakers are under pressure to find a balance between protecting consumers and ensuring the financial health of the state-backed insurer.

Florida has faced several significant insurance crises in the past, primarily driven by the state's vulnerability to hurricanes, rising property damage costs, and legal challenges related to insurance claims and litigation. Here are some key points from past insurance crises in Florida:

1. Hurricane Damage and Rising Costs

• Hurricanes are a major factor contributing to Florida’s insurance crises. The state is prone to frequent hurricanes and tropical storms, which can cause widespread damage. This has led to high claims payouts for insurers, making it difficult for them to stay financially solvent while keeping premiums affordable for residents. After major hurricanes, such as Hurricane Andrew (1992), Hurricane Katrina (2005), and Hurricane Irma (2017), insurance premiums rose drastically.
• In the aftermath of Hurricane Andrew, many insurance companies left Florida due to the financial strain of covering storm-related claims. This led to a significant market contraction and the creation of Citizens Property Insurance as the state-backed insurer of last resort for homeowners who couldn’t find private coverage.

2. Citizens Property Insurance and Market Instability

• Citizens Property Insurance was established in the 2000s as a safety net for homeowners unable to find coverage from private insurers. However, as Florida's risks from natural disasters increased, Citizens' market share grew, leading to concerns about its ability to cover widespread claims. Over time, Citizens became the largest insurer in the state, with nearly a million policies by 2023.
• Because it’s state-backed, Citizens doesn't always set its premiums at market rates, making it an attractive but financially unstable option for homeowners. Rising claims costs and concerns over solvency have led lawmakers to continually debate reforms to reduce Citizens' exposure to risk.

3. Fraud and Litigation Issues

• Another major issue for Florida’s insurance industry has been the rise in fraudulent claims and litigation. Florida has historically had high levels of property insurance lawsuits, often related to roof damage, contractor fraud, and disputes over policy claims. This led to increased litigation costs for insurers, which, in turn, raised premiums for policyholders. The state has tried to address these problems through legal reforms, such as the 2019 assignment of benefits (AOB) law, which aimed to curb abusive litigation practices.

4. No-Fault Auto Insurance Crisis

• Florida has also faced crises in its auto insurance market, particularly related to the no-fault auto insurance system. This system, in place for decades, required drivers to carry personal injury protection (PIP), regardless of fault in an accident. Critics of the system argued that it led to inflated premiums and increased fraud. In 2021, lawmakers attempted to repeal the no-fault system, but Governor Ron DeSantis vetoed the bill, citing concerns about the disruption it could cause to the market. The debate over Florida’s auto insurance system continues, as premiums remain among the highest in the country.

5. Post-2017 Hurricane Irma and Reform Efforts

• Hurricane Irma (2017) was a wake-up call for the insurance industry in Florida. In the aftermath of the storm, insurance rates surged, and many private insurers raised their premiums or stopped writing new policies in the state. As a result, more homeowners turned to Citizens Property Insurance, exacerbating its financial strain.
• In response, the Florida legislature has pushed for insurance reforms in recent years. Some of the key reforms aimed to reduce fraudulent claims, limit insurance payouts in the event of widespread damage, and provide greater transparency from insurers.

6. Insurance Market Challenges in the 2020s

• In the 2020s, Florida’s insurance crisis has continued, with higher premiums for homeowners and commercial properties. While insurance companies have raised rates in response to hurricane risk and increased payouts, Citizens Insurance continues to grow as a backup for residents who cannot find private coverage.
• Lawmakers are now debating how to balance the need for affordable premiums with the reality of natural disaster risks and the financial stability of insurers.

Looking Ahead: The 2025 Legislative Session

As Florida's lawmakers work to stabilize the insurance market, the outcome of this year’s legislative session will have significant consequences for homeowners and drivers across the state. The proposed reforms, which aim to address both homeowners' and auto insurance issues, will likely influence the state’s economic future, particularly with regard to natural disaster preparedness and overall market stability.

With insurance rates continuing to climb and Citizens Property Insurance at the center of the conversation, 2025 will be a pivotal year in shaping Florida’s insurance landscape.

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