Florida Residents May Accept Higher Insurance Costs or Reduced Coverage

According to several speakers at the Florida Chamber’s annual insurance summit in Tampa, homeowners in Florida can look forward to paying even more for homeowners insurance over the next decade as rate increases, non-renewals and insurers pulling out of the market entirely continue to drive up home insurance prices. 

Insurance companies have been losing money in the Florida homeowners market for the last five years thanks in part to aggressive advertising by roofing companies and attorneys in the state that has helped convince homeowners to sue insurance companies. “Florida has more billboards encouraging people to sue you than any country on the planet,” said Mark Wilson, Florida Chamber’s president and CEO during the summit.

According to data from the Florida Office of Insurance Regulation, in 2019, Florida was responsible for 8 percent of all property insurance claims in the U.S. as well as 76 percent of lawsuits. The data also shows that out of the $12 billion in insurance premiums paid by Florida homeowners every year, a shocking 35% or roughly $645 per policy ends up in the pockets of attorneys. 

Experts warn that if claim related litigation is not reduced, residents of Florida will have to accept higher insurance costs or lower coverage levels. While reforms have been passed by the state Legislature last year, it will be up to two years before industry experts will be able to determine if they have helped reduce losses and slow down the rise of premiums.

In addition to lawsuits, the Sunshine State also must deal with severe weather that makes Florida homes more prone to catastrophic damage. Industry projections show that the insurance industry expects to pay out $250 billion if a major Category 4 or Category 5 hurricane hits an urban part of the state. This figure will jump $1 trillion if the state meets its target of adding four million more residents and two million more jobs by 2030.

Fighting Fraud May Help

Stronger protections for consumers and robust prosecutions of criminals that engage in insurance fraud could help reduce insurance companies costs and eventually lead to lower premiums. 

Florida’s chief financial officer, Jimmy Patronis, recently announced that he and his office have put together two teams of insurance fraud detectives. Each team has five detectives and are based in Orlando and Tampa areas. Patronis intends to ask for additional funding to investigate other areas if the teams prove effective.

Another consideration that could help reduce premiums is to reduce risk to homes. Improving building codes that help ensure that homes have a fighting chance to survive hurricane winds could help reduce claim fraud. 

Insurers are fleeing the state

Financial losses put two Florida based insurance companies out of business this year and may others have dropped Florida customers or stopped selling policies altogether in southern and central Florida. This has led to thousands of Florida homeowners having to move their coverage to the state-owned Citizens Property Insurance Corp which is Florida’s insurer of last resort. 

Citizens has seen their policy count grow from roughly 420,000 in 2019 to 724,000 at the end of October of this year. They are projected to cross the 1 million policy threshold by early 2022. All these policies put Citizens at risk, according to experts, if Florida experiences just two catastrophic storms, the company’s $6.4 million surplus would be wiped out and this would force all Florida insurance customers to pay surcharges to help cover Citizen’s unpaid claims.

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