By Chris Isidore, CNN Business
Florida homeowners have faced an expensive and difficult market for homeowners insurance before Hurricane Ian. The devastating storm is about to make matters worse – even for those lucky enough to escape it all damage.
For the better part of two decades, the nation’s major insurers have wanted to have as little to do with Florida as possible, at least when it comes to insuring homes.
This left the market in the hands of small national insurers with limited resources. Six of those companies have been declared insolvent this year, even before Ian. And homeowners in the state were already paying nearly triple the national average for insurance — $4,231 per year per policy, compared to a U.S. average of $1,544, according to data from the Insurance Information Institute.
Domestic insurers may be reluctant to compete for business in Florida due to hurricane and tropical storm risks, said Matthew Carletti, insurance industry analyst for JMP Securities.
“When was the last time you had a $30-40 billion loss in Illinois? he said. “Never.”
Climate change and increased vulnerability to storms are only part of the problem. The insurance industry also blames Florida’s “tort” laws, which it says encourage far more lawsuits against insurers than in other states, of driving up costs.
“There were 116,000 real estate claims lawsuits in 2021. We’re on track to have 130,000 this year, even ahead of Ian,” said Florida-based III spokesman Mark Friedlander. “In other states, you might only see a few hundred. California, which is much larger, had 3,500 last year.
The Florida Litigators’ Professional Group says the problem is not the number of lawsuits, but a lack of proper regulation. Rates have continued to rise even as the Florida legislature passed new restrictions on lawsuits, and they say the state lets the industry decide the rates and amount of coverage offered.
“Florida Insurance Commissioner David Altameir handed them documents in the form of rate increases and changes that reduce coverage to the bare minimum for policyholders in the interest of preserving industry profits. insurance,” said Amy Boggs, property insurance division manager. of the Florida Bar Association. “With Hurricane Ian battering Floridians, policyholders have a weaker and more difficult to use insurance product. This storm will expose the true effect of declining insurance proceeds in Florida.
The public insurer is no longer a “last resort”
Florida’s largest home insurer is a state-owned company, Citizens Property Insurance Corp., which was established in 2002 as an insurer of last resort for those who could not find coverage in the private market. It has seen its number of policies more than double in the past two years, to 1.1 million, or 13% of the state market. The company’s market share is even larger in some large counties — 39% of policies in Miami-Dade and 36% in Monroe County, which includes the Florida Keys. Pinellas County, home of St. Petersburg, which was hit hard by Ian, has 27% of its policies with citizens.
“It’s not what ‘insurer of last resort’ is supposed to be,” Carletti said.
State Farm only covers 8% of the Florida home insurance market, and no other major national insurer has more than 4%. This is only a fraction of their share of the state auto insurance market, where the top five national insurers issue about 75% of policies.
Citizens says it believes it has the resources to pay expected claims for Ian’s damages. If these claims exceed its resources, the company can add ratings that could increase premiums for all of its customers, and then, if necessary, place additional ratings on all insurance customers statewide.
But if the other financially troubled insurers based in the state also have problems paying Ian’s claims, some could spiral into insolvency. This is a serious concern given the financial state of the industry in Florida.
“No matter how big the storm, it’s going to be a problem because they’re already on shaky ground,” Carletti said on Wednesday, just before Ian landed.
Homeowners whose insurers are declared insolvent have their claims transferred to the Florida Insurance Guaranty Association, which backs claims the same way the FDIC insures deposits at failed banks. But it could also increase the cost of insurance for customers of all other insurers in the state.
Flood damage is not covered by homeowners policies
One way homeowners in Florida are no different than those in other states is that floodwater damage is not covered by homeowners insurance. Such complaints should be filed with the National Flood Insurance Programa federal insurer operated by FEMA.
Florida has far more homes covered by NFIP than any other state — nearly two out of three such policies written nationwide, the III’s Friedlander said. But that’s still only about 13% of homes in Florida.
Most homeowners only get flood insurance if they live in a designated floodplain and their mortgage lender requires it, so few residents get it unless they are required to. TO DO.
There are growing concerns that excessive rains and heavy storm surges from Ian could cause flooding in many areas that are not designated as floodplains.
™ & © 2022 Cable News Network, Inc., a Warner Bros. Company. Discovery. All rights reserved.