Is Florida’s Homeowner's Insurance Market on the Brink of Disaster?

Florida's homeowner's insurance market faces significant challenges, with many industry experts and analysts concerned about what the future holds for Florida’s homeowners and real estate market.

Over the past few years, the Sunshine State has experienced escalating issues related to insurance rates, which has led to increased premiums and decreased consumer confidence. This has prompted households to grapple with the financial implications and difficulties associated with the crisis while leaving legislators to implement reforms to secure the market's future.

Piles of damaged property along the side of the highway after hurricane Irma.

What’s Causing Florida’s Property Insurance Crisis?

The fragile state of Florida's homeowner's insurance market can be predominately attributed to the state’s frequent natural disasters, such as hurricanes and flooding. These events result in extensive property damage and a surge in insurance claims.

Unfortunately, as claim costs rise, the burden is shifted onto policyholders in the form of increased premiums. Additionally, the state has struggled with bad actors abusing the system, further exacerbating the situation.

Hurricanes & Storm Damage

Florida's geographic location makes it particularly susceptible to hurricanes, which have long-lasting effects on the property insurance market. These severe weather events result in higher claim costs and spike the demand for insurance coverage.

Consequently, insurers face increased financial strain, forcing them to raise premiums and, in some cases, withdraw from the market altogether. As the frequency and intensity of these storms continue to escalate due to climate change, the pressure on Florida's property insurance market is only mounting.

Recent Legislation and Governmental Responses

To address the crisis, Florida lawmakers have taken several steps to stabilize the property insurance market. Legislative measures have been introduced to lower claim costs, reforming the state's insurance laws to allow for more efficient handling of claims.

Additionally, the state government has called for a special session focused on the insurance market, aiming to outline new regulations and industry practices to better cope with the changing landscape.

One notable legislative effort has been the expansion of the Florida Hurricane Catastrophe Fund, which provides a financial safety net for insurers during catastrophic events. By increasing this fund's capacity, lawmakers hope to lower reinsurance costs for insurers and reduce the financial burden on policyholders.

Challenges Facing Homeowners and Insurers

The Florida homeowner's insurance market has experienced a sharp increase in premiums and insurance costs. This situation affects both policyholders and insurers in the region.

Rising Premiums

Due to the rising frequency and costs associated with natural disasters, premiums have continued to rise, and the number of available options has continued to shrink.  In addition, the cost of reinsurance has continued to rise, making it even more difficult for homeowners who have had to file previous claims.

Consequently, many homeowners struggle to afford adequate coverage, leading to concerns about how they will protect their homes after a disaster or if they can even continue to afford their homes.

The Problem of Underinsurance

Another challenge faced by Florida homeowners and insurers is the issue of underinsurance. A substantial number of policyholders do not have sufficient coverage, resulting in a potentially disastrous financial burden in the event of a significant loss.

This problem is especially concerning considering the area's susceptibility to natural disasters. Not only does underinsurance expose homeowners to significant financial risks, but it also leads to elevated costs for insurers, who must grapple with higher claims payouts when disasters occur.

Insurer Insolvency and Market Exit

Florida has seen several insurers become insolvent, which poses a major concern for policyholders. Insolvency results in a lack of coverage and financial uncertainty for homeowners. Furthermore, the increasing losses and financial strain have led insurers, like Lexington Insurance and AAA, to opt not to renew specific policies and limit their exposure to high-risk regions.

Citizens Property Insurance, an insurer of last resort, has also seen an influx of policyholders due to the unstable insurance market. While intended to offer coverage for homeowners unable to obtain insurance from private companies, the increased demand on Citizens Property Insurance could lead to an unsustainable situation, affecting both policyholders and the insurance market as a whole.

Efforts to Stabilize the Insurance Market

In response to the growing crisis, lawmakers have introduced several reforms intended to stabilize the market and reduce its vulnerability.

One such reform was to eliminate one-way attorney fees. Previously, if an insured party won a court case against their insurer, the insurer had to pay for the insured's legal fees. This resulted in a disproportionately high litigation rate in Florida, with homeowner claims accounting for 9% of all claims in the U.S. but 79% of all insurance litigation.

The elimination of one-way attorney fees has reduced the incentive for unnecessary lawsuits; however, many homeowners view this change to the law negatively.

Expansion of Citizens Property Insurance Role

Financial troubles at South Florida-based insurers have led to policy cancellations for tens of thousands of homeowners in recent years. As a result, the state-backed insurer Citizens Property Insurance has seen a significant expansion in its role.

This has resulted in an increased reliance on Citizens Insurance as a dependable option for coverage. Governor Ron DeSantis and Tallahassee legislators have been working alongside the Florida Office of Insurance Regulation to oversee the growth of Citizens Insurance and ensure that it remains a viable solution for homeowners in need of coverage.

Proposed Reforms to Curb Insurance Fraud

The high rate of litigation in Florida's insurance market has been linked to insurance fraud and abuse, with estimates showing that Florida insurers paid $51 billion over ten years, and 71% of the payouts went to attorneys and public adjusters. New reforms have been proposed, targeting the reduction of fraudulent claims and abuse within the system.

One of the main components of the proposed reforms includes stricter regulations on public adjusters. This measure aims to reduce the number of fraudulent or inflated claims and discourage excessive attorney fees.

These reforms have been supported by both industry professionals and Governor Ron DeSantis, who has expressed concern about the impact of insurance fraud on homeowners and the overall market stability.

Consumer Experience and Market Outlook

Many industry experts are starting to believe that Florida’s property insurance market is approaching a state of collapse, further complicating the situation for homeowners. In 2020, the average premium for Florida homeowners was $650 more than in most other states for comparable coverage and was projected to be $866 higher by 2022.

Such a disparity in cost can put affordable insurance coverage out of reach for many Florida residents.

Strategies for Homeowners

As Florida residents continue to navigate the tumultuous insurance market, there are a few strategies to consider:

  • Shop around: Take the time to research and compare insurers to find the best coverage and rates.
  • Mitigate risks: Implement preventive measures, such as upgrading your home to make it more resilient against storms and other natural disasters.
  • Review your current policy: Regularly check your policy to ensure you have the right amount of coverage. Update it as needed.
  • Consider a higher deductible: A higher deductible can lower your premium, but remember that it also means you'll be paying more out of pocket if you need to file a claim.

Florida homeowners must remain vigilant and proactive to adapt to the ever-changing insurance landscape. They can navigate the crisis and obtain affordable home insurance coverage by staying informed and considering various strategies.

Need Help Negotiating With Your Homeowner’s Insurance Company?

If you've recently experienced damage to your home or any other insured property, contact the Weinstein Legal Team before you contact your insurance company. We will review the specifics of your contract and the damage to your property to ensure we can get you the maximum compensation from the insurance company.

Give us a call at 888.626.1108 or click here to schedule a free, no-obligation consultation with a property damage attorney today.

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