There are few things related to the real estate industry that I can’t figure out. That may sound like an overabundance of hubris, but what it is, is decades of experience and mind-bending research. The one thing, however, that is painful and confusing to me is insurance.
Homeowners insurance in Florida has been difficult, expensive and sometimes unavailable. Insurance companies have fled the state in the aftermath of a series of severe storms and historic damage to property. This impacts not only homeowners’ insurance but auto insurance as well. Americans are driving more expensive cars and of course, residents of coastal communities like Anna Maria Island are exposed to more severe damage and flooding on their expensive properties and expensive automobiles.
The insurance companies that generally sell both homeowners and auto insurance are viewing their risk as one package. During COVID-19 when no one was driving any significant distance, they made money with fewer accidents. Nevertheless, automobile premiums still were increased, which you may have noticed in your recent policy renewal. I did.
Acquiring expensive homeowners and flood insurance can make waterfront properties less valuable and harder to sell. Certainly, new construction properties are required to be elevated and the addition of impact-resistant windows, doors and garage doors as well as breakaway walls on the lower level all help the homeowners of these properties to acquire insurance. But the older one-level properties on the Island and the coastline will have a much harder time finding new owners.
Properties that have a mortgage attached to them must have homeowners’ policies as well as flood insurance in a flood zone. Many homeowners in recent years have chosen to “go bare,” meaning they do not purchase insurance and either arrange their finances to self-insure or take their chances.
In a report from last fall, Forester Research predicted that climate change will destabilize the global insurance industry. Increasingly extreme weather will make it harder for insurance companies to model and predict what their financial exposure is and accurately calculate what they need in reserves to cover claims.
Climate change is a wild card for insurers. Since they can’t determine the real risk, they will charge more to cover an assumed risk or avoid offering policies in certain areas. California, Florida and Louisiana are in the crosshairs of insurance companies and those of us who live in these states will be paying more for coverage as the insurance companies build up their reserves in anticipation of big storms ahead.
For Florida, there is some recent good news with the addition of six new homeowners’ insurance companies that have been vetted and cleared by state regulators. They are Tailrow Insurance Company, Mainsail Insurance Company, Orion 180 Insurance Company, Orion 180 Select Insurance Company, Orange Insurance Exchange and Condo Owners Reciprocal Insurance.
Hopefully, these companies can fill part of the gap for homeowners looking for policies and give Citizens Insurance, the state insurance company of last resort, some relief. The goal is to attract other companies to do business in Florida. Even if more companies come here to sell insurance, don’t expect policy premiums to go down substantially anytime soon.
Insurance is painful not just to me, but to everyone else within the radius of this newspaper’s distribution. My advice is don’t change insurance companies if you’re not dropped, take an Advil and pray for fewer storms.
