Episode 1: Navigating the Home Owner's Insurance Maze

Episode 1 of the Florida Insurance Survival Series 

Rick Kooyman discusses the rise in Florida insurance costs, tracing it back to Hurricane Andrew in 1992, which led to the creation of the Miami-Dade building code and later the Florida building code in 2002. The state established Citizens Insurance to cover high-risk areas, but it became a dominant player. Post-Irma, insurance policies required new roofs, inflating costs. Public adjusters and contractors profited, leading to higher premiums. DeSantis's House Bill 1857 favored insurers, reducing coverage and increasing denials. Four-point inspections, now mandatory, are costly and often lead to policy denials, exacerbating the insurance crisis.

Transcript

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With a basic understanding of what's going on in Florida and how we ended up in this situation. We're in with the insurance world, right? So you go outside of the country, and insurance is just kind of a normal thing in the world, you know, just the fundamental you come down here and all of a sudden it's more than your mortgage sometimes, right? How do we get to that place? What can we do about it? The truth is, it started in 92 and that was Hurricane Andrew. Okay, Hurricane Andrew came through. It hit Miami, and it took homestead off man, like eradicated the whole town. Just wiped it into the ocean, right? That was the first big payout for the insurance industry in the recent past, right? They didn't like that so much. More importantly, the state of Florida didn't like it so much that they had to rebuild a whole town of homestead. And they wanted to say, Hey, we got a situation here we need to address. So we need to change things up a little bit. And Miami and Dade County in particular said, Well, you know what we're going to do, we're going to create our own building code. Right up until that point, everybody down in Florida was using the National Register residential building code, and you know, that was fine, and there were upgrades made for a lot of cases, but there wasn't any requirement, right? So in 92 after Andrew wiped everything out, Miami Dade said, we want to do hurricane building type stuff, and they created the Miami Dade code, which became the Florida building code, right? So in 94 that was law in Miami and Dade County, and that was it, right? They had the Florida building code. The state of Florida wouldn't adopt it Miami and Dade County said, you have to do these things, right? Five, six more years go by. Several more hurricanes comes. 2001 the insurance industries in a panic. They're leaving like dropping everybody and not offering new policies that gave the state a problem, right? Because now, what do we do as homeowners when we have to have mortgage insurance? Well, they said, well, it's too much risk. We want to do that building code thing. So in 2001 the state of Florida finally adopted that building code as a state, but it didn't go into effect until 2002 because there's always a delay. So it's essentially the 94 building code that they call the 2001 building code that was in stated in 2002 right. And when they did that, they created citizens insurance. Right? The citizens was created by the state to answer the problem of all the underwriters leaving and not offering policies right. So they were meant to be the backstop. They were supposed to be like 10, maybe 20% of the market, just to catch the stuff that nobody else wanted to cover. They didn't offer a great product, but they offered a product. Well, they became 80% of the market citizens. The state of Florida wasn't in the industry to be an insurance company, right? The state of Florida was like, we can't do this either. So a couple years back, Irma came through and welcomed everybody back to hurricane season again, right? Well, when Irma came through, it damaged a lot of properties here, but they were on the old insurance policies, and those policies were written in a way that they made them responsible for the structural even at an aged out state. So a lot of houses had 25 year old roofs on them. They were pretty much expired, but then they got damaged by the storm, and they had to replace them with like for like, and the old policy said the roof was covered, so the insurance industry got to buy everybody that got affected by Irma a new roof, right? And that's how the roofing industry ended up inflating the prices, right? Because now we had a shortage, and we had a whole bunch of people that needed work. We had roofers coming in from all over the country, writing sales contracts. And it was going to public adjusters a lot of times, because, you know, citizens is trying left and right to not pay these claims, but the public adjusters are getting a hold of it and saying, Well, there's no way you're getting away with it. It's pretty black and white in these terms, and then in turn, the roofers doubled the prices. So you got 30% going to a public adjuster. You got 200% of the cost of the roof going to the roofing contractor that gets paid by the insurance company. And most of the times they were doing assignments and benefits. Which meant, sign this piece of paper, and it's all taken care of, but I get all the money, right? You don't get the check from your insurance company, the assignments of benefits. Contractor that sign you sign that piece of paper is now your representative to the insurance company. So he gets the whole check. Now, if there's a public adjuster in there, he gets his 30% sometimes it was 20% right? So now we can see how this industry exploded into high expense industry, right? Again, the underwriters left the state right and three, four years ago, there was nobody again to offer insurance, and our insurance started going through the roof. DeSantis passed House bills, 1857, or something like that. And essentially what he did is he put the house rules back in favor of the house, basically casino wise, right? So from an underwriter standpoint, they are now allowed to sell a product that was inferior to the product they used to be selling because citizens decreased their coverage requirements as well. What did they mostly do? They put in the word prorated, right? So now your 10 year old roof is only going to get 25% coverage right? Because they prorated that shit way down so that they don't have to do this again, right? But so they brought in all these new underwriters. We've got all these new companies now offering policies, but the policy details have changed dramatically, right? And and ultimately, you're not buying the same high quality insurance that used to cover you. You're buying a piece of paper that is mostly going to say denied, right? And that's the bottom truth of it. And how do they get to write these high price policies? Is through those forms I just gave you guys right, and those are citizens forms. They were created by the state for the underwriters as they wanted them to be. And the funny part about the insurance industry is they write their own rules right, their their their rules in their paperwork. Don't even say in accordance with building code. They say, in accordance with insurance regulations. Now, what does that mean? They get to write the rules. That's what that means, right? They literally get to make the definitions up as they go, right? So they're carrying all the cards you're paying all the money, and they want to know every year what they're putting their money on now, and that's what that four point form in your hand is, right? So every year, that form expires, so they have the right to say time for new policy. You need an inspection, and they're going to go through the four fundamental systems of that house and look for any reason they don't want to be part of this situation, which is everything's perfect and shiny and there's no corrosion, no leaks, no sketchy products, Everything's new. Okay, we can make a deal if it's not the case. You're going to have to do this, that and the other thing, or you're going to pay three times as much for nothing at all, basically. So what's on that form? That four point form is somewhat confusing to the layperson, the homeowner and whatnot, but it's a checkbox form, right? And as an inspector, all I can do is answer their questions. I don't get to make a judgment or an assessment. They ask, are there these things? Are there leaks? Is there corrosion? You know, how old is the material? Well, it's just take a picture of it. If I check the box, they want to show a photo that says, This is how I came up with that answer, right? And now they're even sending out what they call auditors, which are just private inspectors that follow us around. And almost every new policy is getting double inspected at the insurances cost at that point because they're in house inspectors, but they're basically just checking on our work, right? But that matters, because they're looking for reasons to not, to not represent their policies, right? So oftentimes, people will come and they'll say, How much is that? Four point inspection? You know, I need to get these insurance inspections done. And back in the early 2000s when these were first created by citizens, everybody in the homeowner world said, Well, if citizens wants me to do it, citizens should pay for it. Seemed reasonable. They didn't want to do that, and they didn't want to have their own inspectors do that. So then they said, well, let's let the homeowners fill it out. I tried that for a little and they found out that it was just everything was great all the time, and the things weren't right anyways. And they were still writing policies, and six months later, saying, oh, you know what? I. This policy is null and void. It was actually written on false pretenses. So they went back to private industry and said, well, let's let the home inspectors and the general contractors, the engineers and architects, those people are qualified to do this. Okay, well, that means I got to get paid, right? Citizens isn't going to pay me. So now there's a price competition, right? So originally it was 50 bucks to get a win mint done, 100 bucks to do a four point and it was literally just fill this out, and they weren't really paying a lot of attention to it. The trainings were very sparse, and nine out of 10 times the form was completed well by the inspectors. So now they started paying on those faulty policies again and said, well, we need to send those people back to school. Well, now we have to have certifications. We got to get certified to fill that thing out every couple of years. Well, now there's a price difference, and the price difference is because of I find it important that your insurance be represented correctly, and the cheap guy is sending out somebody to fill out the form, right, so you can get $100 inspection, but you're getting what you pay for, and in the end, you're getting a canceled policy or policy that won't pay out, because they're going to pull that form out and go, you know, what turned out based on these photos, that was already there, or we don't like that, that plumbing leak was, you know, was pre existing, and they're not going to represent it, and they're going to fight every time everything. I can't tell you how many people I talked to that say they denied the claims. First two times you submit it, they probably will deny the claim because it's basically their practice, like that's just a common practice of to make you prove to them that they need to pay for it, and now, not only do they not have to pay for it as easily, they're paying lots less, right? So your coverage on your new insurance policy, on your new roof is, you know, good coverage for the first five years, you know. And by 10 years, it's not worth half the value of the roof, and the roofs got 20 more years of life on Well, the problem is, is that, come 20 years, the insurance companies say, you know, we want that form filled out again. And how do I express what they call remaining useful life, like I'm supposed to predict how long it's supposed to continue to function? Well, they give you a chart, right? And that chart's in there too, and it's based on regions, and there's a couple of different people out there that are creating the charts, but it's just what we have to work with. So the chart says the concrete roof will last you 30 years. The roofer says this is a 50 Year product. I've got a 65 year metal roof. Well, you've got a 20 year under layman, and there's nobody else out there doing anything about it. So those forms with these time windows and these expected life spans, you