Orlando Harmon
USAA, the United Services Automobile Association Group, is the fourth-largest property insurer in Florida. In 2007, USAA announced it would “significantly restrict” the number of new homeowner, fire, and renter insurance policies it sells in the state. This decision was made due to the high risk of natural disasters in Florida, which has resulted in high insurance losses and expenses for the company. Over the years, USAA has continued to face challenges in the Florida insurance market, including increasing claim costs, inflation, and insurance fraud. While USAA still provides homeowner insurance in Florida, it has become more selective and restrictive in its policies.
| Characteristics | Values |
|---|---|
| USAA homeowners insurance in Florida | USAA has restricted new business in Florida, limiting new homeowner, fire, and renter insurance policies |
| Florida property policyholders | Account for 49% of USAA's exposure to natural disaster risk, but only 9% of policyholders |
| USAA's position | Will reconsider if the Florida insurance market becomes more rational |
| USAA's underwriting policy | Will continue to underwrite a member's primary residence in Florida if it is currently insured by USAA |
| USAA's rate changes | Raised homeowners insurance rates by 35% in 2023, and rates are increasing across the board |
| USAA's coverage limits | Limited to 96% of the formulated replacement cost in Florida and California only |
| USAA's business plans | Significantly increased wildfire safety requirements for new home policies in California |
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What You'll Learn
USAA restricts new homeowner insurance policies in Florida
In 2007, USAA, the United Services Automobile Association Group, announced that it would "'significantly restrict" the number of new homeowner, fire, and renter insurance policies it sells in Florida. This decision was made due to the company's financial losses in the state, with Florida policyholders accounting for 49% of USAA's exposure to natural disaster risk while only contributing 12% of its property insurance premiums.
USAA stated that it would only sell new homeowner or renter insurance policies for the primary residences of active military members required to move to Florida pursuant to military orders. The company also intended to ensure that its customers in Florida held only one property policy, discontinuing the practice of insuring second homes.
USAA's decision to restrict new insurance policies in Florida was met with disappointment, with CEO Bob Davis commenting that recent legislative and regulatory actions in the state had left them with "no other option." He further elaborated on the "`untenable insurance market`" in Florida, where USAA was not permitted to charge premiums that adequately reflected the risk borne by the company on behalf of its Florida members.
In recent years, USAA has faced challenges in other states as well, notably California. In 2023, USAA announced plans to increase wildfire safety requirements for new home policies in California, with four subsidiaries requiring a wildfire risk score of 1 on a 32-point scale for eligibility. This decision was made in response to the state's ongoing crisis in its homeowners' insurance market, with carriers like Allstate and State Farm withdrawing from writing new homeowners policies.
While USAA continues to provide various financial services in Florida, including auto insurance, life insurance, banking, and investment products, its restrictions on new homeowner insurance policies remain in place.
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USAA raises homeowner insurance rates in Florida
In 2007, USAA announced that it would "significantly restrict" the number of new homeowner, fire, and renter insurance policies it sells in Florida. This decision was made due to the company's inability to charge premiums that adequately reflected the risk associated with insuring properties in the state. Florida property policyholders accounted for 49% of USAA's exposure to natural disaster risk, while only constituting 9% of policyholders and 12% of property insurance premiums.
Fast forward to 2023, and USAA homeowners in Florida reported a 35% increase in their insurance premiums. This increase was attributed to various factors, including inflation, rising labor and parts costs, and an increase in the rate of disasters and damage claims. Additionally, the high frequency of storms and hurricanes in Florida has led to a significant number of insurance claims, impacting insurance providers.
In 2024, USAA continued to face challenges in the Florida insurance market. Policyholders reported significant premium increases, with some experiencing hikes of up to 200%. USAA also adjusted its coverage limits in Florida, restricting homeowners' ability to insure their homes for less than the full calculated replacement cost. This change was implemented to address increasing claim costs and risks associated with insuring properties in the state.
While USAA has not released official statements regarding the specific rate adjustments in Florida, the company's actions align with the broader trend of rising homeowner insurance rates in the state. Florida's high exposure to natural disasters and the increasing frequency and severity of storms contribute to the upward pressure on insurance premiums.
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USAA's reasons for restricting new policies in Florida
USAA, the United Services Automobile Association Group, is Florida's fourth-largest property insurer. In 2007, the company announced that it would ""significantly restrict" the number of new homeowner, fire, and renter insurance policies it sells in the state. This decision was made due to recent legislative and regulatory actions in Florida, which created an ""untenable insurance market." USAA Chairman and CEO Bob Davis stated that the company was "not allowed to charge the appropriate amount for the risk the association bears on behalf of our Florida members."
Over the past decade, USAA paid approximately $220 million more in Florida homeowner insurance losses and expenses than it collected in premiums. Florida property policyholders account for 49% of USAA’s exposure to natural disaster risk, yet they only make up 9% of policyholders and pay 12% of USAA’s property insurance premiums. This imbalance has led to significant financial losses for the company.
Additionally, there has been a significant increase in insurance fraud in Florida, particularly related to roof replacements. Roofing companies initiate scams by inspecting roofs and claiming prior storm or hail damage, resulting in costly claims for insurers like USAA. While the Florida government has introduced new legislation to combat this fraud, the high number of bogus claims has already impacted insurance providers.
USAA's decision to restrict new policies in Florida is also influenced by the state's high exposure to natural disasters, particularly hurricanes and storms. Florida Citizens are "going naked" on reinsurance below the Cat Fund Layer, indicating a lack of sufficient reinsurance coverage for catastrophic events. This further contributes to the financial risk for insurers like USAA.
Overall, USAA's reasons for restricting new policies in Florida revolve around financial viability and risk management. The company aims to balance its exposure to risk and ensure it can charge appropriate premiums to cover potential losses. By restricting new policies, USAA can better manage its portfolio and protect its financial stability.
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USAA's Florida homeowner insurance losses and expenses
USAA's homeowner insurance rates in Florida have been impacted by various factors, including the frequent occurrence of natural disasters, litigation expenses, insurance fraud, and inflation. In 2023, USAA raised its homeowner insurance rates by 35%, and its rates increased by 18.8% from 2023 to 2024, according to an S&P Global report. These rate increases are in line with industry trends, as Florida home insurance rates have been rising due to heavy losses incurred by insurers.
USAA's homeowner insurance policies in Florida have certain unique features. For example, USAA covers personal belongings on a replacement cost basis, meaning policyholders can receive enough money to buy brand-new replacements for their items. Additionally, USAA offers $5,000 of identity theft protection, which is not commonly provided by other insurers.
USAA's homeowner insurance is available to veterans, active military members, and their families. The company is highly rated and offers affordable premiums, generally in the middle of the pack compared to other insurers. However, USAA's coverage has some exclusions, such as no coverage for floods, earthquakes, war, terrorism, nuclear hazards, animal and pest damage, and water and sewer backup unless specifically endorsed.
Overall, USAA's Florida homeowner insurance losses and expenses have led to restricted policy offerings and increased rates for Florida residents. The company continues to navigate the challenges posed by natural disasters and other factors impacting the insurance market in the state.
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USAA's underwriting criteria for new homeowner policies in Florida
USAA, the United Services Automobile Association Group, is Florida's fourth-largest property insurer. In 2007, the company announced that it would ""significantly restrict" the number of new homeowner, fire, and renter insurance policies it sells in the state. This decision was made due to the company's financial losses in the state, with USAA paying approximately $220 million more in Florida homeowner insurance losses and expenses than it collected in premiums over the past decade. Florida property policyholders account for 49% of USAA's exposure to natural disaster risk, yet they only make up 9% of policyholders and pay 12% of property insurance premiums.
Since the 2007 announcement, USAA has continued to face challenges in the Florida insurance market. In 2019, the company further restricted its underwriting criteria for new homeowner policies in Florida. USAA stated that it would only sell new homeowner or renter insurance policies for the primary residences of active military members required to move to the state pursuant to military orders. This decision aimed to limit the company's exposure to loss and protect the financial security of its customers.
- Restricting new homeowner policies to primary residences of active military members moving to Florida: This criterion ensures that only those with specific circumstances obtain homeowner policies, reducing the overall number of policies and associated risks.
- Limiting the number of policies per customer: USAA intends to ensure that customers in Florida hold only one property policy. This measure was taken to manage exposure to risk and prevent customers from maintaining multiple residences with separate policies.
- Adjusting coverage limits: USAA has adjusted its coverage limits in Florida and California. The company now limits coverage to 96% of the formulated replacement cost, whereas previously, homeowners could insure their homes for 80% of the calculated replacement cost with an additional 25% replacement cost coverage. This adjustment is a response to increasing claim costs and risks in these states.
- Exclusions and add-ons: USAA's standard homeowner policies in Florida do not cover certain risks, such as damage caused by earthquakes, water or sewage backup, and identity theft. These risks can be covered through add-on policies, allowing customers to customize their coverage while managing the company's overall risk exposure.
- Underwriting profit: USAA made $138 million in underwriting profit in Florida in one year, demonstrating its ability to balance risk and profitability.
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Frequently asked questions
Yes, USAA does offer homeowners insurance in Florida, but only for the primary residences of active military members required to move to the state pursuant to military orders.
USAA has cited the \"untenable insurance market\" in Florida as the reason for restricting new homeowner insurance policies in the state. The company has stated that it is not allowed to charge premiums that appropriately reflect the risk associated with insuring properties in Florida. Over the past decade, USAA has paid out significantly more in claims than it has collected in premiums, with Florida policyholders accounting for a disproportionately high percentage of the company's exposure to natural disaster risk.
USAA has limited the number of new homeowner insurance policies it offers in Florida, and it is not clear what specific requirements an individual must meet to obtain one of these policies. However, some general eligibility criteria for USAA insurance products include being an active-duty military member, veteran, or their family member.
