The Florida home insurance crisis has seen nine property insurance companies in the state — the latest Orlando-based St. Johns Insurance and Tampa-based Avatar Property and Casualty – liquidate their holdings, leaving consumers, in many cases, without coverage.
There also have been multiple reports of homeowners policies doubling, or being canceled, in some cases just for a 10-year-old roof.
Living near the ocean in a Key Biscayne condominium, Fausto Gomez became increasingly concerned when his and the neighbors’ windstorm insurance premiums were “easily going up 20% every year.”
“The double-digit increases, frankly, are unsustainable,” he said.
So, the Key Biscayne Condominium Presidents’ Council, decided to do something.
Earlier this year, they brought in Sha’ Ron James, Florida’s former Insurance Consumer Advocate, to educate the public during an interactive presentation in the Crossbridge Church auditorium, where she offered advice and a warning of what was to come.
“The issue is dire,” Gomez said this past week. “We knew about the crisis (developing). We understand it. Before folks were talking about the insurance problem that we have now, we knew what was (happening) and that’s why we were proactive.
“It’s one of the most important issues (facing consumers and legislators) in Florida … accessibility to get coverage and affordability to pay for it.”
Gomez had known James from her work when she represented insurance consumers before the Office of Insurance Regulation.
“I suggested she educate the Key Biscayne residents on the insurance market and what we can do to ameliorate the rates and continue to afford it,” Gomez said. “It’s not only (affecting) condo owners, but single-family homeowners as well.”
James, a Tallahassee-based attorney for Gunster, Florida’s law firm for business, said: “Property risk in Florida might be one of the most challenging insurance markets in the world.”
Among some of the statistics she mentioned:
– There are more than 4,400 insurance-related entities in Florida writing over $154 billion in premiums;
– There are 7.5 million property insurance policies in force;
– Florida has the third-highest property insurance rates in the nation; and
– Roughly 12% of U.S. coastal exposure is in Florida, yet over 50% of related losses come from Florida.
James said through the first nine months of 2021, Florida’s market carriers had a reported net loss of $438 million, and that Citizens, the state-created insurer of last resort, is projecting it will have more than 1 million policyholders this year, putting it in financial peril in the event of a catastrophic storm.
Prior to Hurricane Irma in 2017, she said, Florida had gone 10 years without a major storm and “reinsurance rates were very low. Since that time, rates have increased significantly.”
James said reinsurance carriers insure risks both nationally and globally, so storms, fires or other disasters in other states — or even countries — can have a rippling effect on Florida’s rates. Now, reinsurance rates have jumped into the double digits, 10% per year over the past few years, she said.
“So, when insurance companies have to take a 10% or more increase on insuring their hurricane risk exposure, they always try and pass that through to the insured, through rate increases,” she explained.
Gomez said reinsurance is the “real argument” in soaring prices, snubbing the idea that Florida’s rates have been predominantly linked to complete roof replacements and countless lawsuits on those types of claims, as David Altmaier, the Commissioner of the Office of Insurance Regulation, explained to the Florida Cabinet last week.
“Insurance companies have to buy their insurance from reinsurers (to protect their risks),” Gomez said. “A fire in Paris, let’s say, affects the rates in New Castle, PA.”
James said several factors also are involved when it comes to insurance companies’ risk-taking business.
“The age and location of coastal condominiums play a huge factor,” she said, adding that many are from the “condo boom” of the 1980’s, and those that are 40 years and older “is when we start to see a lot of plumbing-related issues.”
And now, especially since the condo collapse in Surfside last summer, more insurance companies are requiring updated (county-mandated) inspections.
Another factor, James said, that plays into what she calls Underwriting or Market Uncertainty is the “crystal ball factor” driven by data, analytics and meteorologists’ predictions, for example.
Consider the fact there have been more than 100 named storms over the past five years.
In the 2021 hurricane season, there were 21 named storms, seven of which were hurricanes, four that were Category 3 or stronger, and three that made landfall in Florida — Elsa, Fred and Mindy. Only two other Atlantic hurricane seasons have had more than 21 named storms (28 in 2005 and 30 in 2020).
James said the Florida insurance market is “very fragile,” meaning that the balance between supply (insurance companies in the market) and demand (consumers in the market) is delicate.
Insolvencies, a significant risk exposure, less policy counts (on the demand side) and the growth in population have all contributed to a shrinking private market in Florida, she said.
A recent report, titled “Priced Out of Paradise” from WPTV in West Palm Beach, showed that in 2021, the average homeowners policy in Florida soared to $3,643, while the national average was $2,305 (based on data from insurance.com).
Lee Burke, president and CEO of the insurance agency Burke, Bogart & Brownell, Inc., in Boca Raton, said there would be a much more competitive market providing options, “if we didn’t have the fraud and abuse.”
He went on to say that legislators need to take drastic action now, or else “we may not have any insurance market for a large portion of homeowners insurance buyers in the near future.”
James did recommend working with your agent or a broker; consider increasing your deductible; and consider paying off smaller claims with your reserves, or savings, so a relatively inexpensive claim won’t count against you.
Along those lines, independent insurance agent James Cleveland of Lake Mary’s Insurance Services of Central Florida offered other suggestions in a report last week by NBC affiliate WESH-TV in Orlando.
When it comes to roofs, insist on a policy with a replacement value, rather than getting a depreciating, cash offer, Cleveland said.
He also said that paying for a four-point and a wind mitigation inspection might cost a couple hundred dollars up front, but it could make you more attractive to a new company as, of course, a new roof would.
“Sometimes it doesn’t net the premium savings we want it to, but in most cases it does,” Cleveland said.
Finally, he said, read past the deductible and premium page to know what’s actually covered and what’s not.
“You’re buying a promise. It’s a piece of paper, a promise. But you want to make sure it’s the right promise,” Cleveland said in his interview.
Alice J. Roden started working for Trending Insurance News at the end of 2021. Alice grew up in Salt Lake City, UT. A writer with a vast insurance industry background Alice has help with several of the biggest insurance companies. Before joining Trending Insurance News, Alice briefly worked as a freelance journalist for several radio stations. She covers home, renters and other property insurance stories.