Why Are So Many Homeowners’ Insurance Companies Leaving the State?

Understanding Why Homeowners Insurance in Florida Is in Crisis

This year has seen multiple insurance companies in Florida declare insolvency. The remaining property insurance companies are struggling to pay claims or renew policies. For instance, the FedNat insurance company had to cancel 68,000 homeowners insurance in Florida.

Moreover, insurance premiums have risen by about 50%. The Insurance Information Institute spokesman, Mark Friedlander, believes that “this is not a survival market.” So how did homeowner insurance in Florida get to such a level of liquidation and nonrenewal?

Let’s look at the reasons behind this insurance crisis.

The Current State of the Insurance Market in Florida

Due to the present state of private insurers, Florida homeowners have turned to the state insurer of last resort. The Citizens property insurance company. Unfortunately, this inrush is at a worrying rate. The company now has over 850,000 policyholders, double what it had before the pandemic. If the 2022 hurricane season results in significant losses, Citizens will struggle to pay their customers’ claims. This will require Floridians to pay surcharges for a few years.

Even though lawmakers in the state of Florida held a special session in May, Friedlander believes that their actions were too late.

Reasons for the Turbulence in Homeowners Insurance in Florida

1. Insurance fraud

Property insurance fraud is the primary reason behind the insurance market crisis. According to the office of Governor Ron DeSantis, Florida makes up only 9% of the U.S property claims. Yet, it accounts for 79% of property insurance lawsuits in the country.

Florida’s Insurance Consumer Advocate (ICA) explains how these fraudulent claims work.

• Roofing companies canvas areas. They convince property owners they have a roofing problem that needs immediate repair. They also offer free roofs, promising those owners that they could waive the insurance deductible.
• These unsuspecting homeowners then enter an agreement. This provides roofers the go-ahead to file claims on their behalf.
• Your homeowners’ insurance then sends a claim adjuster to assess the roof damage, and they find that there isn’t any roof damage or that the level is minimal compared to what the roofers had described. This assessment leads to a lower payout.
• Upon hearing this, the roofers file a lawsuit.
• Your homeowners’ insurance company has to settle the matter in court or outside, leading to financial loss. The underwriting losses can get up to one billion hence why insurers are leaving the state.

2. Natural disasters and secondary after-effects

Insurance gaps, particularly climate change-related, are another reason behind the insurance industry crisis. The existing property insurance companies are small, and the legal system is far from airtight, inviting payout lawsuits.

Additionally, the housing market has seen a boom in the coastal regions most susceptible to natural disasters. Even though flooding and wind damage insurance coverage exists, secondary disasters like windstorms and hail have contributed to Florida homeowners’ insurance companies jumping ship.

2. A weak market

Due to weather-related insurance claims, homeowners’ insurance in Florida has struggled to pay claims without depleting reserves. For instance, due to hurricanes, Southern Fidelity had to pay excessive insurance claims, cancel 19,000 insurance policies, and raise premiums by approximately 84%. Sad to say, these action steps were not enough to keep the company in operation.

On June 9, the Florida Office of Insurance Regulation declared Southern Fidelity insolvent after it failed to acquire new coverage.

Another reason so many insurers report insolvency is because of a lack of foreign investors. The existing insurers thereby must rely on reinsurance which is not sustainable.

Tips To Help You Reduce the Risk of Nonrenewal

The decision by property insurers to leave the state is out of your control. Even so, you can do a few things to ensure your coverage is continuously renewed.

• Schedule routine roof inspections and repair any damage immediately. Also, it’s best to reroof before it hits the 15-year mark to minimize the likelihood of nonrenewal.
• Put up wind mitigation measures such as hurricane straps and roof bracing.
• Keep all areas of your home in good condition. For instance, removing hazards close to your home’s exterior is wise.

Let’s discuss a few ways to remain alert so as to limit the risk of falling prey to fraudulent claims.

• Watch out for solicitation – Do not fall prey to contractors that offer rebates after an assessment. Instead, contact your insurance firm for a proper inspection.
• Know the signs of fraud— An exaggerated claim for minor damage or when the insurance agent fills in false information to receive a better rate.
• Never sign an assignment of benefits document rashly. Always read the paperwork before adding your signature.

Safeguard Your Property This Hurricane Season

Have you experienced a nonrenewal or are you looking for a provider to protect your home during hurricane season? Coleman insurance agency offers comprehensive homeowners’ insurance in Clearwater. Call us to review your existing policy or to talk about your homeowners’ quote today.