Florida Homeowners Paying Higher Than Normal Rates

As hurricane season approaches, Florida lawmakers are headed back to the Capitol to deal with the property insurance market that is suffering from both skyrocketing premiums and numerous insurance companies going under.

Republican Gov. Ron DeSantis said in recent press release “We’re not going to accept anything less than a very significant package” of changes from lawmakers. 

The changes could include items that will result in higher costs for homeowners via a new deductible for claims related to roof damage, changes to who Citizens Property Insurance (the state-backed insurer of last resort) can insure as well as changes to how much lawyers can collect in fees when suing an insurance company. 

Regardless of any changes that come out of this special session, most experts expect Florida homeowners to be paying higher than normal rates for months or years due to the battered condition of the Florida homeowners market. They also expect rate hikes to continue for the near future.

“You can’t look at the state of the private insurance market in Florida and say it’s good,” Charles Nyce, an expert on insurance and risk management at Florida State University said in a recent Tallahassee Democrat article. “It’s an extremely fragile market that we have. A significant storm, or a series of storms will cause real problems.”

What’s wrong with the Florida property insurance market?

Florida’s property insurance market has been failing for years but state legislators have not been able to pass legislation to address the problem. There are a few things contributing to the issues in Florida, fraudulent roofing claims, the rising cost of reinsurance as well as more frequent and severe storms have all left the homeowners insurance market in the Sunshine State on the verge of collapse. 

While trouble has been brewing for years, it has now reached a tipping point as at least 6 insurance companies have gone under or have left the Florida market entirely. 

 While legislators like to blame a variety of factors, many in the state believe that lawmakers have not made enough effort and have simply kicked the can down the road instead of addressing the issues.

“How high will rates for Floridians have to go before the Legislature acts,” state Sen. Jeff Brandes, R-St. Petersburg, tweeted in May.

As premiums continue to climb and insurance companies leave, options for homeowners have dwindled which has led to a massive increase in customers for Citizens Property Insurance, which is the “insurer of last resort.”  

Citizens is now on a path to become Florida’s largest writer of homeowners coverage in the state. Citizens will most likely have over a million policies in force by the end of the year. 

Recently, FedNat Insurance Company announced they will be cancelling over 68,000 policies before the 2022 Atlantic hurricane season. They have suffered major losses in the last few years due to severe weather. 

Are rates still going up?

Most experts agree that rates will still be headed up in the near future and it could be months or even years before the damage is undone, assuming Florida legislators actually pass legislation that helps. 

There is no simple solution to the issue and some issues, such as inflation and supply chain issues that has led to rapidly rising construction costs are not something that can be addressed with legislation. 

While legislators work toward a solution, three insurance companies are requesting rate increase in the double digits this year. Florida Farm Bureau is asking the Florida Office of Insurance Regulation to approve a shocking 49% increase while First Floridian Auto and Home is asking for a 23% increase and KIN Interinsurance Network requested a 25% hike.

Will legislators limit lawsuits against insurers?

A common statistic that is cited when discussing Florida’s homeowners market is that Florida accounted for roughly 8% of the nation’s homeowner property insurance claims in 2019 but was responsible for 76% of lawsuits which is a shocking statistic. Experts expect it to get even worse this year.

Lawsuits have led to massive losses with insurers losing around $1.5 billion in the state for each of the past few years and most industry experts expect that trend to continue.

Governor DeSantis has made reducing lawsuits a key goal of new legislation. “That is causing these premiums to escalate,” DeSantis said in a recent Tallahassee Democrat article.  “And so we have to address that. It’s something that is very important.”

Lawmakers are looking at a measure that was put in place in Texas that still allows “reasonable and necessary” attorney fees. Fees will be calculated using a “prescribed formula” instead of the free for all that exists now where legal fees are often much more that the actual cost of the claim.

Legislators are also hoping to require lawyers that are suing insurance companies to notify them 60 days before a lawsuit is filed, which they feel will reduce the number of lawsuits. The Florida Legislature is hopeful that by limiting the fees lawyers can collect and making it more difficult to file a lawsuit, homeowners and insurance companies will work out the dispute via arbitration instead of filing a lawsuit.

Changes may be coming to Citizens Property?

In addition to changes in legal fees and lawsuit notification, legislators are looking at making changes to Citizens Property. Currently, Citizens is limited to raising rates a mere 11 percent a year while insurers in the private market are requesting increases of up to 49 percent. This has made Citizens one of the cheapest companies in the state for homeowners insurance, particularly in high risk areas.

Lawmakers may be considering higher rates for Citizens, particularly for new policyholders that are move into risky coastal areas. They may also look at limiting the coverage that Citizens is allowed to offer to primary residents in the state, excluding beach homes and condos that serve as vacation homes.