Surviving the Florida Homeowners Insurance Crisis: Expert Tips

To effectively navigate the crisis, it’s crucial to understand its underlying causes. This isn’t a simple case of one factor gone awry; it’s a complex interplay of forces that have converged to create the perfect storm. Let’s break down the key contributors:

1. The Rise of Insurance Fraud: A Costly Epidemic

Insurance fraud, particularly in the realm of roofing claims, has become a plague on the Florida insurance market. Unscrupulous contractors and public adjusters often prey on homeowners, convincing them to file inflated or entirely fabricated claims, particularly after storms. These fraudulent activities drive up costs for everyone, forcing insurers to raise premiums to offset their losses.

Real-world Example: Imagine a hailstorm hits your neighborhood, causing minor damage to some roofs. An opportunistic contractor knocks on your door, claiming extensive damage and offering a free inspection. They then pressure you to sign an “Assignment of Benefits” (AOB) agreement, transferring your insurance claim rights to them. This allows the contractor to inflate the repair costs, often leading to unnecessary and expensive litigation with the insurance company.

2. Roof Age and Replacement Costs: A Growing Concern

Florida’s aging housing stock plays a significant role in the crisis. Many homes have roofs nearing the end of their lifespan, making them more susceptible to storm damage. While insurers previously covered roofs regardless of age, recent legislation allows them to factor age into premiums or even deny coverage for older roofs. This shift aims to mitigate risks but can leave homeowners with hefty out-of-pocket expenses for roof replacements.

Relevant Data: According to a report by Waypoint Property Inspection, the average lifespan of a shingle roof in Florida is 20 years max. Insurance companies are asking for replacement at about 15 years of age.

3. The Looming Threat of Hurricanes: A Constant Risk Factor

Florida’s vulnerability to hurricanes is no secret. These powerful storms can cause catastrophic damage, leading to a surge in insurance claims. While insurers are required to provide coverage in hurricane-prone areas, the frequency and severity of recent storms have strained their resources. This vulnerability, coupled with the rising costs associated with reinsurance (insurance for insurance companies), contributes to higher premiums for homeowners.

Recent Storm Data: The devastating impacts of hurricanes like Andrew, Ian, Michael and Helene, serve as stark reminders of the financial risks hurricanes pose to the insurance industry and homeowners alike. These events resulted in billions of dollars in insured losses, highlighting the ongoing challenge of managing hurricane risk in a volatile climate.

The Florida homeowners insurance market has witnessed a wave of departures in recent years, leaving homeowners with fewer choices and heightened anxiety. Understanding why these companies are leaving is crucial for navigating the current landscape. Here’s a closer look at the exodus:

Major Insurers Exiting the Florida Market:

• Bankers Insurance: This major insurer announced its withdrawal from the Florida market in 2022, citing “recent legislative measures, unfortunately, failed to adequately address the immediate financial challenges faced by property and casualty insurers, including combating fraud and litigation which exponentially outpaces every other state.” ABC Action News, Jul 25, 2022

• Lexington Insurance, a subsidiary of AIG: Lexington Insurance, an AIG company, another significant player in the Florida market, ceased writing new policies in 2022 and subsequently withdrew from the state, “leaving an estimated 8,000 affluent customers looking for coverage… The Lexington announcement to local agents may be seen as the latest marker for Florida’s struggling property insurance market, beset by hurricane losses, roof claims and litigation. At least six other insurers have stopped writing new homeowner policies in the state or have non-renewed thousands of policies. Two of those companies, St. Johns and Avatar, have been deemed insolvent this year and more liquidations are expected, despite rising premiums for policyholders.” Insurance Journal, March 29, 2022 

• Farmers Insurance: In 2023, Farmers Insurance followed suit, attributing its departure to “For insurers, it’s not simply the cost of paying out claims to policyholders after these disasters. Insurance companies rely on reinsurance, which is basically insurance for insurers, to offset their own monetary risks involved in providing coverage to policyholders… Melanie Gall, co-director of the Center for Emergency Management and Homeland Security at Arizona State University, wrote in The Conversation in June that insurers have fled high-risk, high-loss markets for years… Gall says that reinsurance costs have been rising in response to these disasters. She says that reinsurer’s risk-adjusted property-catastrophe prices rose 33% on average as of June 1, on top of a 25% rise in 2022, citing an analysis conducted by reinsurance broker Howden Tiger.” Pensacola News Journal, Jul 12, 2023

Impact on Policyholders and Market Dynamics:

The departure of these major insurers has had a ripple effect on the Florida homeowners insurance market:

• Reduced Competition: With fewer insurers vying for business, competition has decreased, potentially leading to higher premiums and less favorable policy terms for homeowners.

• Increased Burden on Citizens Property Insurance Corporation: Citizens, the state-backed insurer of last resort, has seen a surge in policyholders as homeowners struggle to find coverage in the private market. This influx puts pressure on Citizens’ financial stability and could lead to assessments on all Florida policyholders if the insurer incurs significant losses.

• Uncertainty and Anxiety Among Homeowners: The shrinking insurance market has left many homeowners feeling vulnerable and unsure about the future of their coverage.

Local News and Expert Opinions:

As quoted on bankrate.com “Aside from extreme weather financially impacting the South disproportionally more than the rest of the nation, other significant issues that have plagued Florida for decades include:

• Insurance fraud and legal system abuse
• Rising reinsurance rates
• Carrier insolvency
• Overburdened FAIR Plan
• Increasing insurance premiums

Gov. Ron Desantis and the Florida legislature have passed laws that address these issues from several angles. The 2024 legislative session passed eight new bills, ranging from flood disclosures to insurance data reporting. Read more about each new law from the 2022, 2023 and 2024 legislative sessions below. A full description of recent property law changes can be found on MyFloridaCFO.” Is Florida’s homeowners insurance market on the road to recovery?, September 10, 2024

Recognizing the severity of the homeowners insurance crisis, Florida lawmakers have enacted a series of legislative reforms aimed at stabilizing the market and protecting homeowners. While the effectiveness of these measures remains to be seen, they represent significant steps toward addressing the underlying issues.

Special Session Legislation Outcomes:

• Senate Bill 76 (July 2021): This bill targeted fraudulent roofing claims by limiting attorney fees in insurance disputes and requiring roofing contractors to provide detailed estimates before commencing work.

• Insurance Reform Bill (May 2022): This comprehensive bill included provisions to strengthen the financial stability of insurers, create a reinsurance fund to backstop insurers in the event of catastrophic losses, and provide financial assistance to homeowners for hurricane mitigation improvements through the My Safe Florida Home Program.

New Laws Introduced in 2023 and Their Expected Impacts:

• House Bill 799: This bill aims to reduce litigation costs by limiting the assignment of benefits, a practice that has been widely abused in fraudulent insurance claims.

• House Bill 881: This bill proposes changes to flood insurance requirements, potentially impacting homeowners in flood-prone areas.

The Florida homeowners insurance crisis presents undeniable challenges, but it’s not an insurmountable obstacle. By understanding the factors at play, adopting proactive strategies, and staying informed about market trends and legislative developments, you can navigate this complex landscape and secure the coverage you need to protect your home and your peace of mind.

Don’t let the current crisis paralyze you into inaction. Take control of your home insurance journey today. Review your current policy, explore your options, and reach out to trusted insurance professionals for guidance. Remember, knowledge is your most powerful tool in navigating the turbulent waters of the Florida homeowners insurance market.

Staying informed about the ever-evolving homeowners insurance landscape in Florida is crucial for making sound decisions. Here’s a curated list of trusted resources to help you stay up-to-date and find the support you need:

Government Websites:

• Florida Office of Insurance Regulation (FLOIR): – The FLOIR regulates the insurance industry in Florida, providing consumer information, industry news, and resources for filing complaints.

Industry Reports and News Outlets:

• Insurance Information Institute (III): – The III is an independent, nonprofit organization that provides objective information about insurance and risk management.

• Insurance Journal: – Insurance Journal is a leading industry publication covering insurance news, trends, and analysis.