Editor’s note: This story was updated to change Universal Property and Casualty to United Property and Casualty.
Since 2022, Florida homeowners have been shocked to discover their home insurance premiums skyrocketing to double or triple their previous rates.
Many others have received letters of cancellation as more than a dozen insurance companies have pulled out of the state or gone under completely.
And now, Florida homeowners are bracing for yet another spike in insurance premiums as the Florida Insurance Guaranty Association voted on March 31 to collect a 1% emergency “assessment” from policyholders to be used to pay for claims insolvent companies can no longer cover.
The rising risk of hurricanes and the cost of reinsurance are two big contributing factors, but rampant fraud and litigation is the silent killer. Here’s a full look at Florida’s insurance crisis.
Why is Florida homeowners insurance going up so much?
In October 2022, the Insurance Information Institute (Triple-I) published data showing that Florida leads the nation in homeowners’ insurance-related litigation, making up 79% of the lawsuits across the U.S. while accounting for just 9% of the total claims.
In the brief, Triple-I states that fraudulent roof-replacement schemes and too much litigation, coupled with generous attorney-fee mechanisms, resulted in huge net underwriting losses for Florida’s homeowners’ insurers.
Triple-I and other insurance companies have pointed to a 2017 state Supreme Court decision as the driving force behind an increase in attorneys’ fees. They say the decision now allows courts to award attorneys with much higher hourly billing rates. Previously, attorneys’ fees were limited to no more than 25% of any judgement against a sovereign.
Between 2017 and 2021, data from the Florida Office of Insurance Regulation showed that $51 billion was paid out by Florida insurers over 10 years. About 71% of that total went to attorney’s fees and public adjusters while only 8% went to claimants.
An increase in storm hazards played another important role. United Property and Casualty, a Florida insurance company that is in liquidation, wrote that between 1851 and 2018, 41% of the 292 hurricanes that hit the U.S. in that time frame also hit Florida — 37 of those 120 hurricanes were rated a Category 3 or higher.
A recently published study led by researchers from the Pacific Northwest National Laboratory and published in the peer-reviewed journal Science Advances looked at how climate change was strengthening hurricanes along the East and Gulf Coast.
Their takeaway? Hurricanes impacting the U.S. could rise by one-third compared to what we’re seeing now if things don’t change.
What is Florida doing to fix homeowners insurance?
At the tail end of 2022, Florida Gov. Ron DeSantis signed a property insurance overhaul bill that would likely raise premium costs for many Florida residents while offering tax rebates for those hit by recent hurricanes.
According to the Tallahassee Democrat, the legislation did nothing to address rising costs. Instead, the bill required state-backed Citizens Property Insurance Corporation policyholders to switch to private insurance companies if their renewal offer was less than 20% higher.
It also required first-time Citizens customers in a flood zone to purchase flood insurance beginning in April — even residents who live in high-rise condominiums. Worse yet, all Citizens policyholders will eventually need to purchase flood insurance within five years, regardless of whether their home is in a flood zone or not.
On April 10, Insurance Commissioner Mike Yaworsky approved a request from FIGA asking for a 1% emergency assessment from policyholders to help pay for claims left over from companies that have since gone insolvent.
Florida insurers will begin collecting the assessments from policyholders in October.
What insurance companies are pulling out of Florida?
According to Florida Department of Financial Services website, there are 14 companies in liquidation.
American Capital Assurance Corporation
Avatar Property and Casualty Insurance Company
FedNat Insurance Company
Florida Specialty Insurance Company
Guarantee Insurance Company
Gulfstream Property and Casualty Insurance Company
Physicians United Plan, Inc.
Southern Fidelity Insurance Company
St. Johns Insurance Company, Inc.
United Property and Casualty Insurance Company
Universal Health Care Insurance Company, Inc.
Universal Health Care, Inc.
Weston Property & Casualty Insurance Company
Windhaven Insurance Company
The future of hurricanes?: ‘The study clearly shows nobody in Florida is protected’
What is the average homeowners insurance cost in Florida?
According to Insurance.com, most U.S. homeowners could expect to pay around $2,777 a year for a policy that would insure a dwelling and liability for $300,000 with a $1,000 deductible.
In Florida, that average spikes to $4,218 a year for a policy with the same coverage and a 2% hurricane deductible. However, that price is expected to rise further after several companies left the state or went out of business in 2022.
This article originally appeared on Pensacola News Journal: Florida insurance crisis? Why home insurance rates keep going up:
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