While Florida has not seen a major storm since 2018, homeowners insurance rates continue to rise and the majority of the blame can be put on door to door roof replacement schemes that result in denied claims, lawsuits and ever increasing homeowner insurance rates.
The state-run insurer of last resort, Citizens Property Insurance Corp is requesting an 11 percent rate increase across the board which is the highest premium increase allowed by Florida law. This is due to the fact more and more homeowners are having to move to Citizens as private market insurers go under or leave the state due to widespread fraud and litigation.
“The home insurance market in Florida is in crisis,” said Mark Friedlander of the Insurance Information Institute in a recent Yahoo Finance interview. “In fact, the private insurance marketplace now is on a trajectory for collapse.”
Despite the fact that no major storms have hit Florida this year, premiums could be headed up 30 to 40 percent in the Sunshine state according to an analysis by the Insurance Information Institute.
South Florida is home to most Citizens policies
The majority of Citizens policies are in South Florida with Palm Beach, Broward and Miami-Dade counties being home to over 50% of their insured properties. This is most likely due to the fact that Citizen’s coverage is cheaper with the average Citizens policy coming in 25 to 30 percent cheaper than a private market insurer. In almost every county that Citizens is writing policies, their rates average 6 to 56 percent less than their competitors.
“It was never intended by the Legislature that Citizens openly and aggressively compete with the private market insurance, but that is exactly what we’re doing today,” said Citizens CEO Barry Gilway during a recent rate hearing.
Citizens currently has almost 800,000 policies and will most likely pass 1 million by the end of the year. They averaged 15,000 new policies a month in 2020 but that figure jumped to 32,000 a month in 2021. “We are literally netting over 5,500 new customers per week. Not month, but per week,” Gilway said at the hearing.
All these new policies may end up creating an issue not only for Citizens but all homeowners in Florida. If a major storm or hurricane would hit the state and Citizens is unable to cover all the claims, the state may be forced to levy a surcharge on all homeowners.
“Every homeowner could be forced to bail out Citizens. There’s too much risk in their portfolio right now,” Friedlander said in the Yahoo article.
Unfortunately, due to the fact that Citizens is legally limited in how much it can raise rates, it now has some of the most attractive premiums in the state, private insurers cannot compete against their pricing.
“You’re incentivizing people to go to Citizens,” said Paul Handerhan, president of the Fort Lauderdale-based Federal Association for Insurance Reform in the Yahoo article. “You’re turning them into the ‘insurer of preference.’”
Two insurance companies in Florida have already gone under and that number could continue to grow if something doesn’t change.
Lawsuits are driving up premiums
Storms have not been the problem in recent years, door to door roof replacement sales have been the driving force behind recent premium increases. Basically, roofing contractors are going around neighborhoods offering replacement roofs or repairs, claiming it will be paid for by the homeowners insurance company. They convince the homeowner to sign an assignment of benefits or a direction to pay which instructs the insurer to pay the contractor directly.
In many cases, the new roof is not covered as it wasn’t damaged by a covered peril such as a storm. Once the claim is denied the contractor partners with a less than honest lawyer and they sue the insurance company. It is the cost of all these lawsuits that are pushing up premiums in Florida.
The Sunshine State has 8 percent of all homeowners in the U.S. but 79% of all lawsuits related to insurance claims in the country which is a shocking statistic. In 2013, Florida saw 27,000 lawsuits related to property insurance, by 2021 that number was over 100,000.
While lawmakers have tried to fix the issue via legislation, they have failed year after year, leaving homeowners to shoulder the burden of expensive insurance coverage
Pro-reform state legislators have been requesting a special session to address the homeowner insurance crisis.
The Florida Office of Insurance Regulation is accepting public comments on Citizens’ proposed rate increase until 5 p.m. April 14. Comments can be sent to RateHearings@floir.com with the subject line “Citizens Property Insurance Corp.”
Additional Articles Related to Florida Home Insurance
- Why does home insurance cost so much in Florida?
- Lowering Home Insurance Premiums Failed to Pass the Florida Legislature
- Lighthouse Property Insurance Announced a Stop to New Policies in Florida
- Florida Legislators Seeking New Path to Fix Homeowners Insurance
- Why does the Florida home insurance market have so many problems?