What one word describes the Florida property insurance market?
Crisis. There's no way around it.
As a peninsular state only 160 miles wide at the widest point we are more susceptible to hurricanes and related weather than almost any other state. It would be easy to blame the dramatic rate increases and insurance policy non-renewals on the weather.
The insurance industry continues to experience deteriorating financial results, prompting many to leave the Florida market altogether. The most recent hurricanes, Michael and Irma, still contribute to the financial woes insurance companies face but they aren't the primary reason for those problems. For instance, the year 2020 was one of the worst years for the property insurance market with the few remaining insurers posting losses of $1.57 billion in losses, in the absence of any hurricane landfall. So what's going on?
The real problem
Consider this: just 8.15% of all U.S. homeowner claims opened in 2019 originated in Florida.1 Yet, Florida accounted for more than 76% of the property insurance claim lawsuits in the entire country.2 In the years between 2013 and 2020 Florida's property insurers incurred $15 billion in claim costs but only 8% of that went to consumers.3
The bulk of those costs - 71%4 - was paid to attorneys.
Those statistics put the property insurance crisis we all experience here into stark relief. We are plagued by a litigation crisis.
How did we get here?
Starting roughly 10 years ago many attorneys, roofing contractors, public adjusters and restoration companies set themselves up as experts in getting claims handled, convincing many homeowners to assign policy benefits to them, adding significant cost to the insurance system. There is no free lunch, and these abusive practices have resulted in homeowners in Florida paying $651 more than consumers in adjacent states like Georgia and Alabama.5 Those cost differences are projected to increase in the coming years.
The primary driver in all this are roofing contractors convincing insureds who do not want to deal with the insurance claim process that minor and repairable storm damage entitles the consumer to a new roof. When the insurance company says otherwise litigation begins and after assigning policy benefits, the insured is powerless to interject common sense into the process.
What can you do about our crisis?
When a contractor comes knocking on your door to convince you they can get you a new roof and all you have to do is assign your homeowner insurance policy rights to them politely tell them no and close the door. The decision to assign policy benefits will impact you down the road in the form of the future cost of insurance and it will affect friends, neighbors,relatives and everyone in Florida.
Increasing deductibles will also reduce homeowner premiums as will bundling insurance policies like auto and life with one insurer. But doing these things won't stop the systemic issues before us.
We need legislative reform in Florida and the most powerful thing you can do is let your state representative in Tallahassee know that we need reform. Now. Before insurance becomes unaffordable for even more Florida residents.
1,2,3,4,5 - see accompanying infographic
Other Reading
- Fraud and Litigation Push Florida's Insurers Into Insolvency, Bloomberg News, March 22, 2022
- Price of Paradise: Roof repair schemes, runaway litigation push Florida insurers to the brink, WFTS, Tampa Bay, January 20, 2022
- Property market crisis looms over Florida, Business Observer, February 8, 2022
- Property insurance reforms likely doomed in House, Florida Politics, March 8, 2022
- Demolish Contractor Fraud: Steps to Avoid Falling Victim, Florida Department of Financial Services
- Florida property insurers dropping homeowners based on roofs' age, ClickOrlando, January 13, 2022
- Florida homeowners file 76% of property insurance lawsuits in the U.S., report says, Orlando Sentinel, April 16, 2021