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Tag: Florida property 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.

Castles in the Sand

Condominium insurance and assessments

Written by Monica Simpson on . Posted in Business, Castles in the Sand.

Does the talk of insurance make your eyes glaze over? If it does, join the club. Insurance of all types is complex and difficult to understand but in the case of homeowner’s insurance, condominium insurance and flood insurance, it’s getting worse.

I recently learned that condominium insurance in coastal areas is skyrocketing by as much as double over last year’s renewal. This is primarily because 2022’s busy hurricane and storm season left the southwest coast of Florida with unimaginable damage. Insurance companies have left the state leaving very few options for coastal communities. This has compounded the existing problem of fraudulent lawsuits being brought against insurance companies that would not reimburse for overinflated home repairs.

Now we’re also facing increases in flood insurance based on a 2021 FEMA decision calculating policy costs. FEMA’s new method is to equitably distribute premiums across all policyholders based on the value of their properties in addition to their location. The increases will give sticker shock to everyone in both single-family homes and condos. The good news is that readjustments will be phased in over a period of 10-15 years.

The challenge specifically to condominium associations is to come up with the unexpected premium payment. Most associations will need to special assess their owners which creates a potential problem for owners who are considering selling.

The Florida condominium rider requires a seller of a condominium to make the following representation: “Seller represents that seller is not aware of any special or other assessment that has been levied by the association or that has been an item on the agenda or reported in the minutes of the association within 12 months prior to the effective date of a contract for sale.” This is a mouthful, but it’s pretty clear language. The problem is when does a “potential” assessment need to be disclosed?

Like any other disclosure when selling property, always err on the side of caution and disclose everything. For instance, possible disclosures could include if an improvement that could lead to a future assessment is in the minutes from a previous meeting or on an agenda for an upcoming meeting, if there is any indication that an improvement could lead to a future assessment included in any mailing to any unit owner or even if a conversation with a board member indicates the possibility of an assessment.

Anything that even has a hint of a special assessment needs to be disclosed to a potential buyer to protect the seller from future liability. On the other hand, if a seller truly had no knowledge of the possibility of an assessment and it was never discussed at a meeting or was never an agenda item, the seller is likely protected from post-closing liability.

As far as insurance increases, there is a glimmer of hope. The lawsuits against insurers have been somewhat addressed by the Florida Legislature putting in place tort reform starting next year. Hopefully, this will encourage insurers to return to Florida’s enormous marketplace, creating some competition with the benefit of leveling premium costs.

We live in litigious times in a state surrounded by water and prone to hurricanes. Sure, it’s the price we pay for living in what most of us feel is a little bit of paradise. Nevertheless, stay on top of all the insurance issues and what your obligation is for disclosure with a clear eye.

Castles in the Sand

Tallahassee finally at work

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

Just when you think it’s hopeless, there is a sliver of hope. The special session of the Florida Legislature is finally getting some changes on the books related to condominium recertification and homeowner’s insurance, all in the same week.

The special session called by Gov. Ron DeSantis was originally meant to address skyrocketing property insurance rates, however, the condominium safety bill was added to the agenda at the last minute. Both subjects were addressed in bills passed by the House and the Senate and signed by the governor.

Broadly, this is the outline of the condominium recertification requirements:

  • Recertification of condos three stories or taller will be required after 30 years, or 25 years if the building is within 3 miles of the coast, and every 10 years thereafter.
  • In addition, the bill requires that condominium associations have sufficient reserves to pay for major repairs and conduct a study of the reserves every decade.
  • Also, it will require associations to provide inspection reports to owners, and if structural repairs are needed, work must begin within a year of the report. Most of the provisions in the law will take effect in 2024, giving everyone some time to prepare.

There are estimated to be more than 1.5 million condominium units in Florida operated by nearly 28,000 associations, according to a legislative analysis conducted earlier this year. Of those, more than 912,000 are older than 30 years and are home to more than 2 million residents. With only about 650 certified structural engineers in the state, this will be a problem in getting the recertification program up and running in a timely manner.

As far as the homeowner’s insurance proposals, legislators came up with several short- and long-term fixes for the insurance market. Some of the proposals are:

  • Preventing insurers from dropping or refusing to insure homes solely because of a roof’s age if the roof is less than 10 years old.
  • For roofs older than 15 years, insurers will have to allow homeowners to have an inspection of the roof’s condition before refusing coverage.
  • Legislators also placed numerous limits on the fees lawyers can collect in lawsuits against insurers. Insurers have continually blamed excessive litigation by trial lawyers and claims triggered by fraudulent roofers for driving up the costs.
  • Legislators also agreed to assign $2 billion to create a new program for reinsurance – insurance that insurers buy – and require any companies that use it to pass those savings on to homeowners.
  • Enhancing scrutiny of insurers that fail.

At this point, no one can predict if rates will go down. My fear is that stricter regulations regarding roofs and scrutiny of companies will not sit well with the insurance companies and give them a reason not to do business in Florida. They will, however, like making it more difficult for lawyers to bring lawsuits. That said, we need to start somewhere, and hopefully Florida insurance companies will decide that our state is a good place to do business with a huge pool of homeowners.

The Florida real estate market has so much going for it, it’s important to everyone to make sure our buildings are safe and our insurance is affordable.

Castles in the Sand

Insurance and affordability

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

It’s the week to report the April sales statistics for Manatee County; it’s also the week where the Florida Legislature may be going into a special session to address the out-of-control property insurance market.

These two topics are completely opposite of each other on the likeability scale – we all love higher sale rates, and we all hate higher insurance rates.

Let’s get the insurance update out of the way so we can enjoy the real estate market part. Gov. Ron DeSantis must be getting a lot of phone calls in Tallahassee because he decided to call another special session of the Legislature when they couldn’t come up with any suggestions that would work to resolve the property insurance problems.

The special session is mandated to bring some stability into the property insurance market, which is experiencing companies leaving the state, dropping policies and/or increasing premiums by double digits. Before they ended their regular session earlier this year, the House and Senate in our state were at odds about how to address the insurance problems. A large part of the problem is higher litigation in Florida relative to other states and with the hurricane season starting June 1, it would take a minor miracle to get anything resolved that quickly.

Before we go over the April numbers, the Emerging Housing Market Index, which measures homebuyers looking for an appreciating housing market and lifestyle amenities, is illuminating for the first quarter of the year. It confirms what most of the real estate economists predicted – that buyers will eventually be priced out of the coastal big city markets and turn to smaller, less dense communities. This, of course, is an opportunity for those who can work remotely and are migrating because of affordability and increasing mortgage interest rates.

The top five emerging housing markets are: Rapid City, South Dakota, Santa Cruz, California, North Port, Florida, Santa Rosa, California, and Naples, Florida. North Port and Naples, Florida were the top two markets in the fourth quarter of 2021. Let’s hope our wonderful Florida west coast doesn’t get discovered too quickly.

Now finally, these are the April sales statistics as reported by the Realtor Association of Sarasota and Manatee:

Single-family homes closed 18.3% fewer properties. The median sale price was $515,000, up 27.2% from last year, and the average sale price was $729,375, up 26.2% from last year. New listings are up 1.1% and a month’s supply of inventory is up 33.3%, which is still very low at 0.8 month’s supply. The median time to contract is five days.

Condos closed 26.7% fewer properties. The median sale price was $350,000, up 48.9%, and the average sale price was $400,371, up 32.1%. New listings are up 7.7% and a month’s supply of inventory is up 14.3%, still very low at 0.8 month’s supply. The median time to contract is also five days.

The president of the Realtor Association of Sarasota and Manatee states, “As we’ve been anticipating, it appears that the rising interest rates and inflation are beginning to put pressure on our local real estate market.”

Yes, I agree there is a slight dip in the market with fewer sales, but I still think it will take a long time for the selling prices to experience the same dip – too many buyers and too few properties.

Florida continues to be nothing if not interesting. Don’t expect it to change anytime soon. Besides as lovely as it may be, who would really want to live in South Dakota after you’ve seen Anna Maria?