Last week, Florida was seriously impacted by another hurricane. Hurricane Idalia spared South and Central Florida but roared into the Big Bend region of North-West Florida as a strong Category 3 with winds up to 125mph.
Thankfully, the storm spared densely populated areas but still did severe property damage in small towns like Perry. It’s estimated the hurricane created some $10 billion in property damage.
Read more on Hurricane Idalia
- Hurricane Idalia hits Florida’s shores as Category 3 storm
- Impending Hurricane Idalia puts Florida on high alert
- Tropical Storm Idalia intensifies, poses threat to Florida
While the cost of this damage pales in comparison to the estimated $112 billion in property damage from Hurricane Ian, which hit the Fort Myers region in 2022, the combined costs will have another serious impact on property insurance rates across the state and will be felt by South Florida residents, even those who are not property owners.
Since Hurricane Andrew impacted South Florida in 1992, and a cluster of hurricanes impacted the state in 2005, property insurance for wind and flood damage has increased significantly.
In 2000, property insurance for a four-bedroom house in South Florida averaged $1,200. In 2010, the cost of insurance on the same house increased to an average of $2,400; and by 2020 that average was $4,200. In 2023, the average is now $5,800, depending on the company one is insured with.
Currently, Florida is one of the most expensive states where property insurance is concerned. The increasing cost in insurance rates has placed an additional financial burden, not only on mortgage holders, for whom it’s mandatory to have property insurance but even on renters, as landlords are forced to increase rental rates to meet their property insurance costs.
But, not only is property insurance expensive in Florida, it’s also becoming difficult to find property insurance companies in the state.
Since 2017, according to reports, eleven property insurance companies have liquidated in Florida, while other companies voluntarily left the state. In addition, more recently, several companies decided against renewing policies, leaving homeowners stranded. The reports further indicate between property insurance companies going insolvent, not renewing policies, and leaving the state, Florida lost over 30 property insurance companies over the last three years.
It’s commonly believed the rash of hurricanes impacting Florida is the reason for the increasing cost in insurance, and the reason why more companies refuse to do business in the state. But, while the storm risk is a definite contributing factor, the real problem is the vast amount of fraudulent claims property insurance companies in Florida have to deal with. According to the Office of Florida’s Governor, while Florida accounts for only 9 percent of home insurance claims in the US, the state records 79 percent of the nation’s home insurance lawsuits.
In recent years, an epidemic of lawsuits has plagued Florida’s property insurance companies, centered around a roofing scam. This scam involves shady contractors soliciting property owners in many neighborhoods, telling them their roofs are defective and in need of repair. When the unsuspecting homeowners sign the contract for the repairs, and the contractors submit the claims they are often rejected. This results in the contractor filing lawsuits against the insurance companies. The more lawsuits filed the higher are the litigation costs for the insurance companies, forcing some out of business. The governor’s office indicated in 2020 and 2021 net underwriting losses for Florida property insurance companies exceeded $ 1 billion, mainly due to accumulative high litigation costs.
With so many property insurers leaving Florida, state-owned Citizens Property Insurance Corporation, formed originally as an insurer of last resort, has fast become the insurer of only resort. Having a little over 400,000 policyholders in 2018, today Citizens have some 1.5 million policyholders, way beyond its original capacity. So large is Citizens’ customer size, that recently it forced thousands of policyholders to be assigned to other smaller insurers. There is a real fear that if a large populated region like South Florida is impacted by a major hurricane, Citizens will not be able to meet the potentially high insurance claims.
Faced with higher insurance premiums and the possibility of being canceled by existing companies, Florida homeowners, many of whom are Caribbean Americans, are placed in a real bind. Many homeowners who have paid off their mortgage, and are not mandated to have property insurance, have made the very risky decision to forgo property insurance. This makes no sense.
Although Florida’s Legislature has passed laws over the past two years to combat the massive fraud contributing to the high cost of insurance in the state, more, much more, needs to be done. Legislators, and entities like the Florida Office of Insurance Regulation (OIR) and the Florida Insurance Guaranty Association (FIGA), need to collaborate intensely to find more significant solutions to this serious problem.
With property insurance rates continuing to increase, making the cost of residential shelter more expensive in Florida, it’s fast becoming financially impossible for most people to continue living, or seek to live, in Florida.
