Property insurance in Florida is expensive, no surprise. Homeowners’ wallets get vacuumed out fast. And it may be a deciding factor for a business to relocate somewhere else or not choose Florida to hang out a shingle.
Many years ago, the property insurance issue became so dire that the State of Florida decided to create a state-sponsored insurance option. The Florida Catastrophe Fund and Florida Citizens Property Insurance Corporation were established as insurers of last resort—a less-costly alternative to private insurance for qualifying homeowners. This was implemented even though Florida taxpayers could be on the hook for billions of dollars of deficits if the proverbial “100-year storm” hits Florida.
The years passed. Florida grew. Seventy percent of Florida’s residents chose to live in a coastal county. The state experienced more frequent hurricanes. Reinsurance rates increased. Homes became more expensive, especially those adjacent to big bodies of water, and insurance premiums jumped, boosted by relentless inflation. Looking ahead a few years, 64,000 residences will be highly vulnerable to flooding.
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So now, once again, our property insurance market finds itself in a difficult situation of distress that is hard to fix. The result? As Florida TaxWatch has stated, “Excessive litigation costs and expensive hurricane damages drained the funds of insurance companies, pushing many to declare insolvency or leave the state.” With fewer insurance companies, insurance providers had less competition while financial risks mounted. Greedy plaintiff attorneys swarmed the state, pushing new strategies to increase insurance payouts, putting scads of money into their pockets. With this dire confluence of events, premiums skyrocketed for policyholders.
Florida’s insurers have been reeling for years from frivolous lawsuits and fraudulent claims. Insurers needed changes in tort laws and rules to limit insurance-related litigation, which was driving up insurance policy premiums.
The Legislature stepped in, passing insurance reforms during recent special sessions. Some reforms focused on the financial stability of property insurance providers to ensure they could pay claims by property owners. These reforms will ultimately reduce insurance rates in the long run. The Legislature also provided some property owners with exemptions on taxes for residential properties and flood insurance. A special program was established for homeowners with the highest needs for financial assistance. In addition, legislators also established a one-year Home Hardening Initiative that helps to prevent future damages, which limits the growth of premiums and limits risk for insurers.
It appears that the goals and legislation passed in the last three legislative sessions are having the desired effects. For the first time in about ten years, property insurers in Florida have “collected more in premiums than they have spent on claims.” This means that the likelihood of insurers’ costs being reduced and some savings being passed on to policyholders is increased.
But let’s be clear about the real culprit here—it’s nature’s hurricanes, storms, and flooding, not the insurance industry. Insurers deserve to earn a profit if they put their capital at risk to offer Floridians a way to recoup their losses from storms. You would not put your capital into an investment where you can’t earn a fair return, so why should insurance companies?
Other stories you may want to read:
- John R. Smith: U.S. and Florida Flooded With Unneeded Laws - September 26, 2024
- John R. Smith: Florida’s Economy and Education Systems Ranked Best In U.S. - September 4, 2024
- John R. Smith: The Road to Complete Destruction - August 30, 2024