Florida Homeowner’s Insurance Crisis
October 11, 2023
Florida's homeowners insurance market is in crisis. Major companies like Farmers Insurance, Bankers Insurance, and Lexington Insurance have pulled out of the state voluntarily.
Seven local property insurance companies filed bankruptcy since February 2022 and policy premiums are on the rise statewide.
AAA Home Insurance announced it is not renewing a small percentage of high-risk homeowner’s policies in the Sunshine State.
With homeowners already paying more than the national average for property insurance, the situation has become so dire that about 15% of Floridians who own their home and do not have a mortgage are choosing to go without insurance altogether. Florida homeowners pay $6,000 per year on-average for insurance, a 42% increase from last year, while the national average is only $1,700 annually.
In the wake of Hurricane Ian...
After Hurricane Ian wreaked havoc on parts of the Gulf Coast, including Naples, Fort Myers and Sanibel, experts predicted that more insurance companies in the Sunshine State would struggle due to the estimated $17.27 billion in property damages. According to reports submitted to the Florida Office of Insurance Regulation, Hurricane Ian resulted in 521,819 residential property claims.
With Ian predicted to become one of the costliest storms to make landfall in Florida, the Florida Office of Insurance Regulation placed twenty-seven companies on a watch-list due to concerns of financial stability. However, it is important to note that Hurricane Ian did not single-handedly plunge the state’s insurance industry into crisis. It only worsened existing problems that had been brewing in Tallahassee for years.
A Lion’s Share of Insurance Lawsuits
Like a dog chasing it’s tail, Florida has become a treacherous insurance market for both consumers and insurers alike. Excessive insurance claim lawsuits, the soaring cost of reinsurance (which is the insurance that companies turn to when claims become too overwhelming), the risks posed by climate change, inflation, the high expenses involved in repairing and replacing homes, supply chain problems, and more have contributed to the current state of disarray.
Florida is known for having one of the most generous attorney-fee systems in the nation. However, this can lead to unfair outcomes, where attorneys receive massive payouts while policyholders are simply reimbursed for damages. A recent legal decision stipulates that attorneys can receive up to 2.5 times their hourly rate in tort court, even a simple lawsuit can result in attorneys walking away with hundreds of thousands of dollars.
To make matters worse, unethical restoration contractors in Florida have been playing dirty. They ask policyholders to sign documents, usually an assignment of benefits (AOB) form, that give the contractor the right to collect claim payments directly from the insurer as well as file a lawsuit without the homeowner's knowledge or consent. Moreover, it's the homeowners' insurance coverage that foots the bill and pays for both damages and attorney’s fees if the contractor wins in court.
Legislative Actions Being Considered
With the Sunshine State being the most-hurricane prone and the most litigious state at the same time, the current system is overly stressed. If homeowners want property insurance rates to go down, the Florida Legislature needs to revise any errant regulatory practices, such as:
- Change Tort Laws – Florida accounts for a disproportionately high number of insurance lawsuits (80%), but a small percentage of insurance claims (10%). The imbalance can be corrected through common sense changes in statutes for tort laws.
- Disincentivize Lawsuits – The state recently enacted legislation that eliminates one-way attorney fees that the court previously could award to prevailing parties in disputes with insurers. Other antithetical incentives are being discussed.
- Curb Use of AOB – Homeowners who are suing insurance companies normally are not trying to take advantage of the insurer; but a clever use of assignment of benefits allows unreputable contractors to inflate the cost of settlement.
- Pay Actual Cash Value – Insurance policies should only cover the value of what was lost and full replacement cost should be an additional expense; but only if the homeowner wants to pay for the additional coverage.
To make matters worse, homeowners are being targeted by individuals claiming to conduct roof inspections on behalf of insurance companies. Unfortunately, there's nothing illegal about using unethical means to make money. They also will recommend a new roof instead of a repair. This often requires the homeowner to pay the difference between the actual cost and what the insurance company covered.
Thankfully the Florida Legislature and the Governor’s office have been working to craft new legislation to tackle the property insurance crisis. Several new bills seem to be a step in the right direction but the timeline to see changes remains uncertain. At Nsurance Nation, our experienced staff can help find the home insurance policy that works best for you. Call 1-833-450-9490 to speak with an independent agent.
