Does Florida's Home Insurance Meltdown Get You Down?

 By Catherine Powell

Image courtesy Pixabay

Two weeks ago, Farmer's became the fourth major company to pull out of the Florida home insurance market.  This came on the heels of a record increase in the cost of homeowner's insurance in the state, making many fear that they soon may not be able to either find or afford to insure their homes.  Since the average cost of home insurance in Florida is already three times that of most other states in the nation, this has the potential to effect everything from home values to the 2024 elections.  If you live in Florida and are losing sleep worrying over your home insurance, this week's blog will show you what's what and who's who in the Florida home Insurance scene.

It wasn't always this hard.

As recently as two years ago, it was a breeze to acquire home insurance in the Sunshine State.  The costs were comparable to the rest of the nation and price increases were only around 5% per year.  Now the price for home insurance has skyrocketed to an average of $4,083 per year and increases have been averaging 35% or more for some homes.  Other homeowners have had their coverage dropped outright, either due to their proximity to the water or because their insurer pulled out of the Florida market.  While homeowners and politicians alike wring their hands as home insurance continues to melt down in the Florida Sun, the causes and cures seem as hard to find as shade on the beach.

The real culprit, so we've been told, is Florida's geography.  Sandwiched between the Atlantic Ocean in the east and the Gulf of Mexico in the west puts the state in the crosshairs of hurricanes nearly every summer.  Since the turn of the 21st Century, the state has been lashed by 79 hurricanes and tropical storms.  Even when the brunt of a named storm doesn't make direct landfall in Florida, it isn't unusual for major flooding to occur from rain bands produced by ones that pass to the east or west of the state.  Whgoverile rain and wind produced by hurricanes can wreak havoc, the biggest cause of home damage is often the tidal surge that precedes a named storm.  With 8,436 miles of coastline, Florida is a big target for some of the biggest hurricanes and tropical storms.

Image courtesy Pixabay

Curiously enough, even with all that going against it, Florida insurers didn't seem to have much trouble covering homes here until quite recently. Even after Hurricanes Matthew and Irma hit in 2016 and 2017 causing more than $50 billion in damage, coverage for Florida residents was never an issue.  Yet in the past few years, more than 400,000 Florida homeowners have had their insurance coverage dropped and fourteen insurance companies have stopped writing new policies in the state.  The problem was both the amount of damage Hurricane Ian did last year, which was the costliest to hit Florida, added to a distinct lack of political will.

Back in 2019, when Governor DeSantis took office in Tallahassee, the average insurance premium in Florida was $1,988.  Today, the average has jumped to more than double what it was just back then. While the 2020's have brought the state's insurance woes to the forefront, the problem the state is facing today has roots that are more than 30 years old.  After Hurricane Andrew decimated the Miami area in 1992, the Florida legislature created the Residential Joint Underwriting Association, a state-backed entity that covered homes other companies refused to insure.  In no time, the program became one of the largest insurers in Florida, which caused legislators to fret that the state was taking on too much risk.  This in turn prodded them to offer incentives to insurers who were willing to take over some of these policies.

This created a rat's nest of big and small insurers willing to get in on the action.  The first sign of trouble with this fix reared its ugly head after the active hurricane seasons in 2004 & 2005 saw 10 hurricanes cause severe damage to Florida. After 2005, many of the small insurers found the cost of reinsurance had risen so high that a number of them either closed or went belly up.   Add to this the cost of litigation that insurers have endured during the past few years which the state legislature has been unable to curb.  To fix these problems, Florida legislators recently convened a special session in order to pass a property insurance bill designed to provide short and long-term fixes that included:

1.   Preventing insurers from refusing to insure homes with roofs that are less than 15-years old.
2.   Limiting the fees lawyers can collect in lawsuits against insurers.
3.   Creating a $2 billion reinsurance fund designed to help small insurers stay solvent.
4.   Scrutinizing insurance companies that fail in Florida.

Image courtesy Pixabay

Sounds good, right?  It would have been had legislators taken the time to study the situation or analyze the probable results of these actions.  However, they convened no panels, nor did they hear much testimony from insurance regulators.   In total, the legislature spent only 3-days to pass a 101-page bill that's supposed to quell the state's insurance crisis. The reason given for the quick fix was that homeowners needed to be able to get their homes insured ahead of hurricane season.

As a result, nobody is particularly happy with the outcome, including legislators, insurers and homeowners.  In the past 18 months, 15 insurers have stopped writing policies in Florida and seven others have gone belly up.  Claim fraud in the state is at an all time high and the insurance industry has reported billions in losses, partly due to the staggering amount of lawsuits filed against insurers. (79% of homeowner lawsuits filed in the US last year were in Florida.) Excessive roofing claims are driving up the cost of everyone's policies.  The cost of homeowner's insurance in the state is still prohibitively high.  More than one Florida legislator has lamented the fact that the bill was passed so quickly without considering all the data.

While the governor tries to dispel the angst that every homeowner in Florida feels when it comes to the current home insurance crisis, I see storm clouds forming ahead.

Catherine Powell is the owner of A Plus All Florida, Insurance in Orange Park, Florida.  To find out more about saving money on all your insurance needs, check out her website at http://aplusallfloridainsuranceinc.com/