How Florida avoided California insurance disruption and why should they keep track of it?

A few years ago, Florida’s insurance market was on the verge of collapse. Homeowners faced surge in premiums, insurers were bankrupt or fleeing the state, and citizens, a state-backed insurance company with last resorts, were growing at an unsustainable pace. The problem wasn’t hurricanes or bad luck. The legal system that encouraged fraud and endless lawsuits, threatened homeownership and threatened the wider economy was broken.

Then, in a rare moment of political clarity, Florida lawmakers acted. Between 2019 and 2022, they enacted drastic reforms to stabilize the market. They took on trial bars, suppressing predatory lawsuits and eliminated one-way lawyers’ fees that transformed Florida into the capital of national litigation. result? The insurance market has begun to recover.

But now there are people who want to roll back these reforms. That’s a mistake. If Florida needs a story of attention, it should not be looked for even more than California.

For years, California has buried the insurance market under the regulatory layer, making it nearly impossible for insurers to operate sustainably. The state prohibits insurers from using predictive risk modeling. This means that rather than explaining the increased risk of wildfires, the rate must be based on outdated historical data. The rate approval process can take years and allow businesses to either write their policies missing or leave the market altogether. Many chose the latter.

result? Insurance companies have abandoned California, claiming homeowners have fewer options and higher premiums. Hundreds of thousands of policyholders were not designed to handle this level of demand. As the private market shrinks, fair plans burdens increase and costs become even higher.

Regulation isn’t the only challenge for California. The state faces the risk of rising wildfires, increasing rebuilding costs and making home insurance more expensive. But instead of adapting, California doubled its outdated policies that make it even more difficult for insurers to run. As a result, well-established insurance companies such as State Farm and Allstate have stopped writing new policies in the state.

This is not consumer protection. It is the slow collapse of the state’s insurance system, driven by policies that ignore economic realities.

In contrast, Florida has been digging from the insurance crisis for years. In 2022, only 16,000 policies moved from citizens to private markets moved. By 2024, that number had skyrocketed to 477,000, nearly 3,000%. Insurance litigation applications have dropped by nearly 70%, cutting one of the biggest cost drivers with a higher premium.

These reforms did not just happen. They needed political courage and stood up to entrench the benefits of the old system. But now those same benefits want to unleash these policies and claim they have gone too far. If they succeed, Florida will return to where it started.

There is another part of the puzzle that is often not noticed: reinsurance. Florida insurers rely on insurance companies’ insurance reinsurance to spread the risk of major storms. Most of this reinsurance comes from a global market where investors constantly assess risk. These companies are not charities. If they believe Florida’s legal and regulatory environment is once again unstable, they will raise the fees.

Since reforms in Florida, reinsurers have been proactive and have provided more affordable coverage to major insurers. But when policymakers reverse courses, they send a clear signal to reinsurers that Florida is back in their old ways. These costs go directly to the homeowner.

Florida either sticks to policies that stabilize the market or follows the path to a California crisis. The state must avoid over-regulation to drive out insurance companies and enforce homeowners with state-supported coverage. A thriving market requires competition, stability and predictability rather than artificial price control that distorts incentives.

Florida lawmakers have taken bold action to correct the insurance crisis. Now they need to have discipline to maintain the course. Reforms are working. The system is stable. The momentum is real. The worst thing Florida can do right now is to throw it all away.

Jeff Brandes is a former Florida Senator and founder and president of the Florida Policy Project.