Florida residents are feeling the weight of hefty home insurance policy rate increases while simultaneously experiencing less insurance protection for their money, a phenomenon called “shrinkflation.”
As new laws are being proposed that affect property insurance, it’s important that policyholders know how much insurance fraud is costing all of us.
Florida’s Insurance Consumer Advocate, Tasha Carter, has reported that insurance fraud is costing the average family between $400 and $700 of increased premiums each year. State lawmakers made real progress last year to curb such fraud, passing legislation that would hold bad actors accountable, but a portion of one law was placed on hold by a temporary legal injunction.
As advocates for insurance policyholders, the Florida Association of Public Insurance Adjusters applauds legislators’ efforts to rein in fraud, but we are hopeful they will also address “shrinkflation,” the growing problem of diminished coverage coupled with an increase in premiums.
Below are examples of how coverage is diminishing:
Managed repair programs give all power in the repair process to the insurer who then dictates which vendors the policyholder is allowed to utilize, which can sometimes be a repair company the insurer actually owns.
These strategic tactics often lead to costly delays because the small number of “vendor-approved” repair companies are unable to keep up with demand. If the policyholder opts to hire a contractor outside of the program, the insurer may only cover a small amount. Always consult a professional before making these decisions.
Water loss limits are also cutting coverage and capping payment for repairs at an arbitrary amount despite the cost of your policy, value of your home or extent of the damage. A million-dollar policy may only provide $10,000 in water damage coverage from a burst pipe.
Insurers are now seeking to repair roofs at Actual Cash Value (what a roof may be worth after years of depreciation) rather than Replacement Cost Value (what it costs to currently replace the roof). This puts many policyholders at risk of realistically not being able to afford the roof over their heads. As equally important, this scenario could also violate Fannie Mae and Freddie Mac loan servicing requirements.
Legislators are looking at solutions that will continue to allow for full replacement cost benefits for most common roof claims, and we hope they do everything they can to protect policyholders.
Insurers need solutions to address rising costs, and those solutions should include the protection and interests of policyholders as well. For example, the continued enforcement of unlicensed activity laws will cut down on costly fraudulent claims. Another example would be further training insurers’ licensed adjusters to not accept claims from unlicensed, bad actors.
Policyholders should be allowed to opt out of managed repair programs without penalties and shouldn’t be discouraged from seeking help from licensed public adjusters who advocate exclusively for them in their time of need.
We encourage lawmakers to take a closer look at what’s really covered in property policies and what the average homeowner can afford to pay for out-of-pocket expenses as well as their annual premiums. The effects of diminished coverage could have a much larger impact on the housing market throughout our fair state.
Working together, we can find solutions to the overarching issues facing Florida’s insurance industry, while also protecting policyholders’ rights.
Chris Cury is president of the Florida Association of Public Insurance Adjusters’ board of directors. He obtained his public adjusters license in Florida in 2008 and is focused on advocacy for insurance consumers.
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This article originally appeared on Florida Today: Protect Florida Homeowners Against Insurance “Shrinkflation” | Opinion