A 'policy endorsement' can lower insurance costs. But you have to waive the right to sue.

Recent legislative reforms that ended much of the incentive for lawyers to sue insurers are getting credit for improving insurance companies’ willingness to financially fortify Florida properties against disaster and loss. But is the promise of an up-to-20% reduction in your premium worth giving up the right to sue?

We'll get to that in a second. Because even if Floridians have more insurance companies to choose from since those reforms passed in 2023, the changes have yet to move the average Florida homeowner premium out of the No. 1 spot — the costliest in the country.

But there’s a new offering that promises to reduce insurance premiums — and lawsuits — significantly just as soon as the ink is dry on policies.

It's called a policy endorsement. Yes, millions of Floridians have probably never heard of it, and here are five things to know about buying into what the lone carrier in Florida offering it , American Integrity Insurance Group, calls “binding arbitration endorsement.”

What is a policy endorsement?

The policy endorsement stipulates that the policyholder agrees to give up the right to file a lawsuit and have a judge and jury decide about payment from an insurance claim settlement.

Agreeing to this policy endorsement proposes premium savings averaging nearly 20%, according to the company that offers it. Legislation passed last year as the insurance industry was looking tattered allows the new wrinkle in policies.

It’s a bargain considering you could immediately reap significant savings. But giving up the right to sue in exchange for a lower premium is a swap that alarms longtime consumer advocates. Some states have outlawed the practice, they note.

So far, it's relatively untested in Florida. Just one Florida insurance carrier currently offers a premium reduction in return for essentially waiving the right to sue. A spokesperson for that company, American Integrity, did not reveal how many customers have opted for this new endorsement.

As such, there's no widespread evidence about how it's working out. But the implementation of the new policy-wrinkle is being closely watched as other insurers weigh whether to offer it as well , industry watchers say.

It presents a quicker path — around Florida courts — to resolve settlement disputes

Under policy endorsement, a dispute over how much a carrier should pay to settle a claim and what the policyholder believes the total dollar figure on that claim should be would be determined outside the court system. First , a policy endorsement would usher the two sides into mediation. That means the policyholder and an insurance company representative would go to a neutral mediator to resolve their differences.

If that’s unsuccessful, the next step is binding arbitration. An arbitrator, who must be a member of the Florida Bar in most cases, would meet with the insurance company’s representative and the policyholder to set a date for a hearing within 120 days. After the hearing, the arbitrator issues a final decision within 30 days.

Binding arbitration means the arbitrator's decision is final. Unlike a court decision, there's no appeal.

But the disagreement would be resolved much faster. In contrast, some insurance quarrels that go to civil trials can take years to adjudicate.

Company offers policy endorsement on other coverage, too

American Integrity Insurance Group offers the chance to lower premiums this way on several of its product lines, not just homeowner's insurance. It’s also available on its insurance to protect against flooding and insurance for condos, boats, rentals, renters’ possessions and golf carts.

The company's brochure highlights not only the potential savings, but also the policy endorsement's quicker resolution, the company's willingness to pay for the arbitration procedure's costs and "peace-of-mind when it comes to dispute resolution."

The new rules for litigation make it more of an attractive option

Reducing lawsuits has long been a goal for a successive number of Florida's governors and lawmakers. The state's Republican leadership , business advocates and industry lobbyists have long blamed soaring premiums on the amount of litigation, fraud and abuse of the legal system they say ultimately costs Sunshine State consumers.

An annual data report from the Office of Insurance Regulation shows that, in 2022, the state accounted for 14.9% of the nation's insurance claims along with 70.9% of all the U.S. lawsuits involving insurance. A large percentage of insurance carriers' costs are blamed on legal expenses.

Others, however, think the state's disproportionate share of this legal wrangling has more to do with extreme weather the state faces as a peninsula, along with insurance carriers' reluctance to pay the full value of the damage that extreme weather inflicts.

Either way, legal reform in Florida is now another factor for consumers to consider, industry watchers say.

Ryan Papy, president of Keyes Insurance, a South Florida agency, says he can see policy endorsements becoming more popular with homeowners and insurance companies, given the new rules governing insurance lawsuits. The changes drastically reduced the number of cases in which attorney fees can be recovered from the insurer when the outcome favors the policyholder.

“If you have a claim and you're not happy with what the carrier's willing to pay, you … actually have to pay the attorney” when it comes to more traditional policies, Papy said.

That takes away much of the incentive that lawyers had to take on insurance-related cases.

Robert Norberg, president of Arden Insurance Associates, said half of the firm's clients who qualify for coveragefrom American Integrity Insurance Group are taking the new option because of the lower premiums. The Tampa-based company’s homeowner clientele is more limited because it generally don't insure older homes, Norberg said.

Those taking this kind of policy “are probably not the kind of customer who would be thinking lawsuit anyway,” Norberg said.

Consumer advocates worry policy endorsements pit David v. Goliath

Florida has the highest property insurance rates in the country, with the state’s homeowners paying $3,340 per year on average in 2023, according to the industry-funded Insurance Information Institute, based in Malvern, Pennsylvania. Some advocates fear, however, that saving 20% on premiums — which would save about $668 on the state’s average premium — might look like a fool’s bargain in the wake of a claim that could involve tens of thousands in damage.

The traditional defenders that policyholders have to assist them in insurer disputes, like lawyers and public claims adjusters, don’t have a formal role in binding arbitration.

Don Phillips, past president of the Florida Association of Public Insurance Adjusters, finds it “pretty amazing” that Florida has allowed a claims resolution process that other states have outlawed to protect insurance policyholders.

“Binding arbitration, don’t forget, is like a mini-trial,” he said.

A brochure from American Integrity explains that although the two sides agree on the arbitrator and the company will pay the costs of arbitration, the insurance company will not provide a lawyer for the policyholder in the process.

That’s an unfair match-up, said Phillips, who has worked in the insurance claim industry for more than 40 years.

“I guarantee you, American Integrity … it will be a lawyer (representing the company) and for you not to have a lawyer who knows all the intricacies of the arbitration code … it’s just insane to think a policyholder could do an arbitration without a lawyer,” Phillips said.

​​ Anne Geggis is the insurance reporter at The Palm Beach Post , part of the USA TODAY Florida Network. Y ou can reach her at ageggis@gannett.com . Help support our journalism. Subscribe today .

This article originally appeared on Palm Beach Post: A 'policy endorsement' can lower insurance costs. But you have to waive the right to sue.