Haris Ashley
Florida's insurance crisis has resulted in several insurance companies leaving the state, going out of business, or choosing not to renew policies in high-risk areas. This has left many homeowners scrambling to find new coverage, with over 100,000 Floridians turning to Citizens, the state-run, non-profit insurance company. The crisis is attributed to various factors, including hurricanes, litigation, and rising reinsurance costs, which have made the Florida insurance market expensive and risky for companies. Some of the notable insurance companies that have left Florida or reduced their exposure include Farmers, Progressive, and AAA. While the situation has caused turmoil for homeowners, new legislation impacting rates and the entry of new insurance companies into the market appear to be easing the crisis.
| Characteristics | Values |
|---|---|
| Reason for insurance companies going out of business in Florida | Hurricanes, litigation, rising reinsurance costs, and fraudulent claims |
| Companies that have left Florida or reduced their exposure in the area | Farmers, Progressive, AAA, Nationwide |
| Florida's insurer of last resort | Citizens Insurance |
| Senate Reform Bill passed to address insurance issues | Senate Reform Bill 2-A |
| Number of new "take out companies" approved by the Florida Office of Insurance Regulation (OIR) | More than 30 |
| Average yearly home insurance premium for Floridians | $4,200 |
| Increase in Floridians' yearly home insurance premium compared to the previous year | 42% |
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What You'll Learn
Home insurance rates are increasing
Florida's home insurance rates are increasing, and there seems to be no sign of this trend letting up. The state's geographic location makes it susceptible to hurricanes, which play a significant role in driving up insurance costs. The rising risk of hurricanes, coupled with the skyrocketing costs of raw materials required to repair or rebuild homes, has placed a financial strain on insurance companies, leading to higher premiums for homeowners.
In addition to the impact of hurricanes, Florida's insurance market has been affected by rampant fraud and litigation. A 2017 state Supreme Court decision increased attorneys' fees, resulting in higher costs for insurance companies, which are then passed on to policyholders. Between 2017 and 2021, data from the Florida Office of Insurance Regulation revealed that approximately $51 billion was paid out, with 71% going towards attorney's fees and only 8% reaching claimants. This has resulted in significant underwriting losses for homeowners' insurers.
The insurance crisis in Florida has had a notable impact on homeowners. Many residents have lost their insurance coverage and have been forced to seek alternative options, often turning to state-backed Citizens Property Insurance or Citizens Insurance. The crisis has also affected the real estate market, as buyers struggle to obtain the necessary insurance to secure mortgages and close on their desired homes.
In response to the escalating insurance rates, Governor Ron DeSantis has implemented reforms to alleviate the burden on residents. In 2023, he signed House Bill (HB) 837, which addressed excessive attorney's fees and revamped the bad faith framework for negligence suits. Additionally, legislation such as HB 7065 and SB 76 has helped curb unrestrained litigation and tightened eligibility requirements for Citizens Insurance. These measures have contributed to greater stability and cost savings for Florida residents.
While the average rate increase in Florida has decreased from 21% in 2023 to a projected 0.2% for 2025, homeowners insurance rates are still significantly higher than the national average. With the ongoing challenges in the insurance market, it is essential for homeowners to stay informed about their options and take proactive steps to ensure they have the necessary coverage in place.
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Homeowners are forced to find replacement coverage
Florida's insurance crisis has left many homeowners without coverage, forcing them to find replacement policies. This crisis has been caused by a combination of factors, including hurricanes, reinsurance costs, and litigation, which have resulted in significant financial losses for insurance companies.
Hurricanes and storms have had a significant impact on Florida, with the state bearing the brunt of these natural disasters in the US. Between 1851 and 2018, 41% of the hurricanes that hit the US made landfall in Florida, causing extensive damage and leading to costly claims for insurance providers. The impact of these disasters is further exacerbated by rising reinsurance costs, which insurance companies rely on to offset their own risks. As a result, insurance companies have been forced to increase their rates or leave the state.
Litigation is another major factor contributing to the crisis. Florida accounts for 79% of homeowners' insurance-related lawsuits in the US, despite only 9% of total claims originating from the state. Fraudulent roof-replacement schemes and excessive litigation, coupled with high attorney-fee mechanisms, have resulted in substantial underwriting losses for insurers. The high frequency of lawsuits has also made Florida a less attractive market for insurance companies, further exacerbating the problem.
The impact of the insurance crisis extends beyond just homeowners. The real estate market has also been affected, as buyers struggle to obtain the necessary insurance to secure mortgages and close deals. This has made it increasingly difficult to buy or sell homes in certain areas of Florida.
In response to the crisis, Florida lawmakers passed Senate Reform Bill 2-A in December 2022, aiming to address the state's most pressing insurance issues. While these changes are expected to take a few years to fully take effect, there are already positive signs. New insurance companies are entering the market, and the Florida Office of Insurance Regulation (OIR) has approved more than 30 new "take-out companies" to provide alternative options for policyholders. Additionally, independent insurance agents can assist homeowners in finding coverage that meets their specific needs by offering a wide range of policies from different carriers.
Homeowners who are facing the cancellation of their policies or struggling to find new coverage can seek assistance from the Florida Department of Insurance Regulation (FLOIR). Citizens Insurance, the state-backed insurer of last resort, is also an option for those who are unable to find affordable coverage elsewhere. However, it's important to carefully consider the limitations and drawbacks of this option.
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Insurance carriers have stopped writing new policies
Florida's home insurance market has been in crisis, with insurance companies leaving the state, going out of business, or choosing not to renew policies in high-risk areas. The crisis has been caused by several factors, including hurricanes and litigation, which have made it difficult for homeowners to find coverage. This has also affected the real estate market, as buyers struggle to obtain the necessary insurance for mortgages.
Several insurance carriers have stopped writing new policies in Florida, including United Property and Casualty Insurance Co., which ranked among the top 10 homeowners' insurers in the state. In a bulletin to its agents, the company cited the 2020 storm season, increased reinsurance costs, and worsening litigation trends as reasons for its decision. Florida Farm Bureau and TypTap Insurance have also joined the list of carriers exiting the state, announcing they would no longer write new homeowners or dwelling fire policies. Progressive Insurance, while not leaving the state, has decided not to renew certain policies for older homes with shingle roofs.
The impact of these decisions is significant, with tens of thousands of homeowners affected and struggling to find alternative coverage. Many are turning to state-backed Citizens Insurance, but this option may not be optimal due to concerns about its financial stability and ability to handle a major disaster.
To address the crisis, Florida lawmakers passed Senate Reform Bill 2-A in December 2022, aiming to rectify the state's insurance issues. The Florida Office of Insurance Regulation (OIR) has approved over 30 new "take-out companies" to remove policyholders from Citizens and reduce the risk burden on the state-backed insurer. While the crisis appears to be easing with rate reductions and new companies entering the market, it will take time for policyholders to feel the full benefits of these changes.
Homeowners in Florida who are seeking coverage still have options. Shopping for insurance through an independent agent can provide access to a wide range of policies from different carriers. Additionally, companies like State Farm, Travelers, First Florida, and Nationwide continue to offer homeowners insurance in the state.
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Florida leads the nation in homeowners' insurance-related litigation
Florida has been facing an insurance crisis, with insurance companies leaving the state, going out of business, or choosing not to renew policies in high-risk areas. This crisis has been affecting homeowners, many of whom have lost their insurance and been forced to find coverage elsewhere, and the real estate market, with buyers finding it difficult to obtain the insurance required for a mortgage.
The Florida Office of Insurance Regulation (OIR) analyzed nationwide homeowners' insurance claims and litigation data and found that Florida leads the country in litigation by a large margin. In 2019, Florida accounted for 8.16% of all homeowners' claims opened by insurance companies, but 76.45% of all homeowners' suits opened against insurance companies. This trend has been consistent over the years, with Florida having almost 65% of countrywide litigation in 2016, 68% in 2017, and nearly 80% in 2018.
The reasons for Florida's excessive insurance-related litigation are attributed to unique legal and behavioral processes and cultures that incentivize lawsuits against insurers. Florida's litigation culture is evident through the abundance of billboards advertising lawyers promising massive settlements on claims. Additionally, Florida experiences a substantially higher ratio of lawsuits to claims closed without payment, eight times higher than the next highest state.
The excessive litigation, along with fraud, has placed a financial strain on insurance companies, leading to increased premiums for homeowners. Senate Bill 2-A was signed into law in December 2022 to address these issues by restricting lawyers' rates for property insurance claims and curbing fraudulent lawsuits and litigation costs. While these legislative changes are underway, it will take time for the situation to improve for both homeowners and insurers.
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Insurers are going insolvent
Florida's insurance market has been in a state of crisis, with insurance companies leaving the state, going out of business, or choosing not to renew policies in high-risk areas. This has left many homeowners scrambling to find replacement coverage, often turning to state-backed Citizens Property Insurance or Florida's insurer of last resort, Citizens Insurance. The crisis has been attributed to several factors, including hurricanes, reinsurance costs, and litigation, which have collectively contributed to a challenging and risky environment for insurance providers.
Hurricanes and natural disasters have played a significant role in the insurance landscape in Florida. Between 1851 and 2018, 41% of the hurricanes that made landfall in the US struck Florida, resulting in multibillion-dollar damages. Hurricane Ian, for example, caused an estimated $109 billion in damage in the state. The frequency and severity of these events have led to significant financial burdens for insurance companies, impacting their ability to remain solvent.
Reinsurance, which acts as insurance for insurers, has become increasingly costly due to the rise in disasters. Reinsurer's risk-adjusted property-catastrophe prices rose by 33% on top of a 25% increase in 2022. This has further strained the finances of insurance companies, making it challenging for them to offset their monetary risks.
Litigation has also been a significant factor in the insurance crisis. Florida accounts for approximately 79% of home insurance lawsuits in the US while only contributing to 9% of home insurance claims. Fraudulent roof-replacement schemes, excessive litigation, and increased attorneys' fees have resulted in substantial net underwriting losses for homeowners' insurers. The combination of these factors has made it challenging for insurance companies to operate profitably in Florida, leading to their decision to leave the state or go out of business.
In response to the crisis, Florida lawmakers passed Senate Reform Bill 2-A in December 2022 to address the state's pressing insurance issues. The Florida Office of Insurance Regulation (OIR) has approved more than 30 new "take-out companies" to remove policyholders from Citizens. While these changes are expected to take a few years to fully benefit policyholders, there is optimism for improvement in the insurance market.
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Frequently asked questions
The insurance crisis in Florida is caused by a combination of factors, including hurricanes, an increase in litigation, rising reinsurance costs, and fraud. These factors have led to insurance companies pulling back, leaving the state, or going out of business.
Several insurance companies have gone out of business or withdrawn from the Florida market, including Farmers Insurance, Bankers Insurance, and Lexington Insurance (a subsidiary of AIG). Other companies that have stopped writing new policies or left the state include Progressive, AAA, and Nationwide.
Despite the crisis, Florida homeowners still have several options for insurance coverage. State-operated insurers like Citizens Property Insurance are available as a last resort, but their rates may be higher than private insurers. Shopping the market through an independent insurance agent can help find the best coverage and rates. New insurance companies are also entering the Florida market, providing additional alternatives for homeowners.
