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Tag: Florida insurance

Florida insurance ground zero

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

We are on the brink of hurricane season and this year promises to be an active one, so what goes hand in hand with hurricanes? Insurance.

We’re talking here about homeowners’ insurance, although flood insurance is also slated to have increases over the next few years. FEMA is changing the way they calculate flood insurance and revising the factors used to determine their premiums.

High insurance premiums aren’t anything new to Florida. During the 2004 hurricane season, there were five named storms, bringing billions of dollars in damage to the state within a six-week period. After that, many private insurance companies left the state, leaving Citizens Property Insurance Corp., the state-sponsored insurer, as one of the few options.

Homeowners with mortgages, which is about 60% of all owners, are required to purchase property insurance. There are homeowners who have opted to go without insurance if they own their home free and clear or to self-insure. The average annual home insurance cost rose about 20% between 2021 and 2023 according to an insurance shopping site called Insurify, and they are projecting another 6% increase this year.

Why is this happening? Obviously, storms and the higher number of storms that appear in the Atlantic basin are increasing. However, the primary cause is the amount of fraud that has been going on in the state in recent years. In April of 2022, Florida Gov. Ron DeSantis called a special session of the Florida Legislature to address the issue of insurance fraud. At that time according to the Office of Insurance Regulation, Florida accounted for 79% of the nation’s homeowner’s insurance lawsuits.

Insurance companies reported $1 billion in underwriting losses in Florida in each of the last two years, much of it due to lawsuits that resulted when homeowners transferred their rights through the “Assignment of Benefits” form. Homeowners would sign a form transferring the full rights of the policy from the policyholder to the contractor, who was working with an attorney.

Once the rights are transferred, the attorneys pay the contractors, usually for roof replacements or repairs, then file a lawsuit against the insurance company, adding up to three times their standard rate. This type of fraud resulted in insurance companies reporting $1 billion in underwriting losses in Florida for the past two years.

The other generator of increased homeowners’ insurance costs is the increase in reinsurance. Insurance companies require their own insurance in order to write policies assuming some of the risk. Reinsurance has increased rates in recent years because of COVID-19, inflation and climate change.

On the positive side, Florida Senate Bill 2022-D has reined in the litigation of this fraud by 20%. This opened the door for private insurers to come back into the state and start stabilizing rates through competition and lower future premiums. In addition, Citizens Insurance has started the process of “depopulation” of their customers, who are starting to go over to private insurers.

Florida may have the largest hurricane risk in the world but we’re not alone. Homeowner’s insurance has gone up along with everything else all over the country. California in particular has issues because of the wildfire threat, and Louisiana is also one of the major targets for hurricanes coming up the Gulf of Mexico.

Ground Zero and our insurance problems may be overstated, but we are certainly volatile and subject to the whims of the weather. Again, the price we all pay for living on a sub-tropical coast.

Get insurance if you can

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Even though our area has so far been spared a major hurricane hit this year, the threat is always there, as is the threat of losing your insurance. What happens if you can’t get homeowners insurance is one of those “I don’t even want to think about it” questions, but, if it happens to you, you’re in good company.

Florida and Louisiana are the two states in the country that have the most challenging homeowners insurance markets. Florida has the highest average home insurance premium in the country. They also both have state-run insurance of last resort companies that are called Citizens, and they are both trying to reform their state’s insurance obligations.

In addition, Florida is attempting to bring insurers into the state to help create more competition, driving costs down. The state’s Legislature has worked to reduce the number of lawsuits by limiting what attorneys can charge. High attorney fees were mostly blamed for driving up costs and driving out insurance companies, leaving homeowners no choice except to go to Citizens. It’s too early to know for sure what the Legislature is accomplishing, however, there is some evidence that progress is being made.

Nevertheless, the stress for homeowners is enormous, prompting some residents to consider leaving waterfront properties and properties prone to flooding. If you do find yourself in the unimaginable position of not being able to get homeowners insurance on your home or condo while carrying a mortgage, you could be in for some serious problems. Not having the ability to find insurance on your property violates your mortgage agreement. Your lender may force you into a more expensive policy, which is called lender-placed or force-placed insurance. Worse, your loan can be declared in default, risking a foreclosure if you’re not able to satisfy the mortgage.

I know this sounds dramatic and it is, however, one way is to have an advocate on your side like an insurance broker who has access to any new insurance companies coming into the state as well as an understanding of the system and may be able to offer advice. Also, Fair Access to Insurance Requirements (FAIR) plans were created in the 1960s to make insurance available in areas that had abnormally high exposure to risk. The Florida contact numbers are 850-513-3700 and 904-296-6105.

Citizens Insurance in Florida asked the state Office of Insurance Regulation to raise its rates for property insurance by an average of 13.1%. This request was denied and replaced with a cap of not more than a 12% increase. Citizens’ higher-ups feel the approved rate increase is artificially low, resulting in potential exposure beyond its assets. This affects the private market by not being able to compete with what was designed to be the company of last resort for insurance.

As a comparison, Louisiana’s Citizens’ Property Insurance is uncapped. This means their rates are based on what’s happening in the marketplace, allowing private insurers to compete and taking some of the financial exposure of the state. In addition, Louisiana has an incentive program that provides grants to encourage insurers to write property policies in areas of the state that are most at risk.

The solution to Florida’s unraveling insurance market is obviously to attract more private companies into the state, a feat that is easier said than done. We can only hope a plan is in place before the next “big one” comes knocking on our coastline.