Florida reforms introduced in December and further proposals put forward in the first quarter suggest the state is “quite serious” about fixing fraud and legal system abuses that have inflated claims costs and caused a crisis, the Insurance Information Institute (Triple-I) says.

Triple-I says Florida policymakers have advanced a sweeping tort reform package, although it may take years for abuses “to be wrung out of the system” and for policyholders to achieve premium benefits.

“While achieving market stability will take time, Florida stakeholders must remain focussed on stopping legalised fraud,” Triple-I says. “The time for action is now.”

Reforms are aimed at legal provisions that have fuelled the misuse of assignment of benefits (AOB) arrangements, causing soaring claim payments and legal costs and the exit of insurers from the market.

In AOB arrangements a third party takes over the claim from policyholders, but may conduct unnecessary or overly expensive repairs and then take the matter to court in a battle with the insurer.

Triple-I says Florida’s unique environment has allowed plaintiff attorneys to be “richly compensated” with little downside if they pursue legal action, due to “one-way fees”. Insurers are also often kept in the dark in the early stages about the cost of an assigned claim, which tempts some providers to inflate costs.

Legislation approved in a special session late in 2022 eliminated AOBs and “one-way attorney fees” for property insurance claims. The arrangements had meant insurers had to pay the fees for policyholders who successfully sued, but policyholders didn’t have to pay insurer attorney fees if they lost.

Triple-I says Governor Ron DeSantis is asking the legislature go further and has proposed eliminating one-way fees, AOBs and legal fee multipliers for all lines of insurance “to permanently disincentivise frivolous lawsuits and realign Florida’s insurance market to promote more competition”.

New legislation has also provided $US1 billion ($1.48 billion) in taxpayer funds for a program to provide carriers with hurricane reinsurance.

Triple-I says it could still take up to five years for existing AOB lawsuits to work their way through the Florida court system.