Florida’s insurance market has long been under stress. Ian could do worse

A man stands in front of his damaged home after Hurricane Ian in Matlacha, Fla., on Oct. 3.

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A man stands in front of his damaged home after Hurricane Ian in Matlacha, Fla., on Oct. 3.

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Even as Hurricane Ian made landfall in Florida last week, the state’s insurance market was already in its own state of disaster.

Florida homeowners pay the highest rates in the nation: nearly three times the national average, according to the Insurance Information Institute, an industry group. And Floridians are growing their money — about 33% annually — more than the average U.S. growth rate of 9%.

But in Florida, hurricanes aren’t the only thing that causes weather. The increase in litigation and the increase in reinsurance costs are other factors, experts say.

Six insurance companies have declared insolvent this year. Others have turned customers away or stopped writing new policies. As a result, the number of policyholders on the state-sponsored insurance company, Citizens Property Insurance, has fallen.

Meanwhile, as Floridians look to recover from a recession Of the tens of billions of dollars in damages caused by hurricane 4, some are worried that Ian could be the last straw for many insurance companies, increasing costs and sending Florida’s insurance market close to disaster. .

“The simple truth is you can’t be the most hurricane-prone state and the most regulated, and expect the lowest property insurance rates,” said state Sen. Jeff Brandes, whose district includes part of Pinellas County in the Tampa Bay region, avoided the worst of Ian.

Although no hurricanes hit Florida in 2020 or 2021, the state’s insurance industry reported losses of less than $1 billion annually. Even before Ian, 2022 is already planned to be the same.

The average rent for homeowners is over $4,000 a year in five different Florida counties, mostly in the Miami and Palm Beach areas, according to a state report from July. In Monroe County, home of the Florida Keys, the average price is $6,700. In the country, home insurance costs about $1,600 a year on average.

“We were in trouble three years ago. But we are falling down now,” said Brandes.

Florida records the nation’s largest number of claims

A big part of the problem in Florida is insurance coverage. “What we’ve been dealing with in Florida for years is a man-made disaster, nothing to do with hurricanes,” said Mark Friedlander, a spokesman for III, in an NPR interview this week. “We have a real problem on our hands here.”

According to the state insurance authority, nearly 80% of all homeowner’s insurance claims in America come from Florida. In comparison, the state accounts for only 9% of all homeowner claims.

A number of factors unique to Florida have combined to create a regulatory environment, experts say, including strict rules on attorney fees and lax regulation of “benefits” agreements for individuals. to hold policy.

Claims often start like this: A contractor contacts a homeowner about potential damage, perhaps to their roof. The homeowner signs what is called a joint benefits agreement, which allows the contractor to handle the insurance. The insurance company can then deny the claim or dispute the amount, and the contractor can file a claim against them – sometimes without the policyholder’s knowledge.

Attorneys’ fees can reduce the amount of the claim that is contested. In 2019, III estimated that the most lawsuits cost Floridians’ policyholders a combined $1.6 billion.. The number of claims has risen dramatically over the past two years.

Insurance companies operating in Florida say they have been forced to raise rates to cover the cost of handling claims. “We’re all paying that ridiculous penalty,” said Lisa Miller, a former Florida insurance commissioner who now works as an insurance business consultant in Tallahassee.

A member of the City of Miami Florida Task Force 2 Search and Rescue team checks a home for victims of Hurricane Ian in Fort Myers Beach, Florida on October 3, 2022.

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A member of the City of Miami Florida Task Force 2 Search and Rescue team checks a home for victims of Hurricane Ian in Fort Myers Beach, Florida on October 3, 2022.

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Expensive hurricanes have also contributed to rising prices

Hurricanes in Florida have become more expensive in recent years. A portion must be paid to climate changewhich is possible increased storms and caused more rain and floods.

Florida’s population growth the other side. No state in the eastern United States is growing as fast as Florida. And its fastest-growing metro areas include Orlando, Tampa and Cape Coral-Fort Myers — all areas affected by Ian.

These days, the private insurance market of Florida is usually made up of small companies, regional, or Florida national insurance companies.

Small companies can’t build the same kind of savings as larger companies. As a result, they often rely on their own form of insurance – known as reinsurance – to pay claims at high cost.

But as the winds increased, reinsurance costs have increased dramatically. Some reinsurers have pulled back from Florida. Others are increasing rates – reinsurance rates for Florida insurance increased by about 50% this year, according to a report.

Those costs are passed on to consumers, Miller said. Between 35% and 50% of your homeowner’s insurance goes toward the cost of reinsurance.

Citizen, the state-backed insurance company, recently crossed 1 million subscribers – more than doubled the number of policies in the last two years – due to the growth of private insurance has increased prices or reduced customers.

Since Citizens is supported by the state, it is limited in its ability to increase productivity and is often cheaper than competitors. Private insurers say that makes it difficult to compete, especially in hurricane-prone ZIP codes where only a handful of insurance companies offer policies.

Hurricane Ian could cause many insurers to leave the Florida market

Even as damage estimates rise, officials have expressed confidence that insurers will be able to pay Hurricane Jan. claims.

It is too early to know exactly how much the claims will cost. One analytics firm estimated it the wind and storm losses will be between $28 and $47 billion. Another comparison is the total loss of the individual insurance companies total of about $63 billion.

The state may see millions of claims in all types of insurance, including flood insurance, said Miller, the insurance industry consultant. (Many Florida homes affected by Ian did not have flood insurance, and may have legal disputes over wind or flood damage.)

The concern is that a large payout from one storm could be the last straw for companies that have already struggled to deal with other challenges of doing business in Florida.

If rates continue to rise 30% or more, as they have for many Floridians in recent years, some Florida homeowners may end up paying more for insurance than they would otherwise. their mortgage, said Brandes, the state legislator.

“You’re going to buy the middle class from home ownership. It doesn’t depend on that,” said Brandes, who said the cost of his own home insurance has increased by as much as 60%. two years ago. “The Achilles heel is our statewide real estate market.”

The state legislature held a special session in May where lawmakers passed a bill addresses some issues with ceilings and attorneys’ fees. At last, some Democrats complained the bill did not help homeowners enough.

The May session “treated the flu when the property insurance market got Stage 4 cancer,” said Brandes, a Republican, who added that he hopes to convene another session before January.

“This is the best opportunity to make some difficult decisions,” he said. “You have to do some things that have not historically been on the table, but they have to be on the table in order to save this market going forward.”

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