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Homeowners Insurance and the Florida Crisis

Florida — a tropical paradise known for its white sandy beaches, endless entertainment, and lavish coastal cities. Who wouldn’t want to live in the Sunshine State? Since the early 2000s, Florida’s population has increased by nearly 5 and a half million people and the numbers keep climbing.

Although those living in the state have a lot to enjoy, residents may face an unexpected and messy challenge: the Florida homeowners insurance crisis. While it’s already hard enough to find a little slice of Florida to call home, insuring it will be just as difficult. 

What caused the Florida homeowners insurance crisis?

The state's location gives it an abundance of warm, sunny days, but it also leaves it vulnerable to the downsides of the climate. Unpredictable weather, intense tropical storms, and unforgiving hurricanes all create threats to not only the safety of residents but their homes and property, too. With six of the ten costliest hurricanes hitting Florida coasts, homeowners know the importance of insuring one of their most expensive assets.

While the peninsula seems to be a magnet for calamitous weather, Florida’s current laws aren’t helping insurance companies. Assignment of Benefits (AOB) laws allows third-party individuals, such as lawyers and contractors, to negotiate a settlement with insurance companies rather than homeowners themselves. Costs of claims have nearly tripled as these individuals take advantage of the new law, which has resulted in numerous insurance companies facing lawsuits and causing their profits to plummet. From 2016 to 2019, the number of lawsuits against insurance companies in Florida had risen by more than 700%, leading insurance companies to report an overall loss of $340 million in 2019. But that’s not all. Florida is also known for its relentless insurance scams, specifically roofing scams, which is further costing insurance companies millions of dollars a year. 

Well…this is a real mess. What does this mean for homeowners?

Since the massive hurricanes of 2004 and 2005, insurance companies started scaling back their offerings to Florida homeowners or withdrawing services altogether. State Farm, one of the nation’s largest home insurers, was one of the first to stop covering homes in the state and others soon followed. This left Florida homeowners with fewer options and the remaining insurance companies more vulnerable to scams, lawsuits, and floods of claims from hurricanes and tropical storms. 

Since then, more and more companies have continued to no longer service Florida or have faced liquidation due to a number of lawsuits. This has given Floridians a new threat to fear: non-renewal notices. These notices have effected a number of Floridians, particularly those in high-risk areas including closer to the coasts.

For those who are able to find insurance, they could potentially face a rate increase of nearly 20% to 30%, the largest increase since the 2004 & 2005 hurricane seasons. For Florida homeowners who already pay an average of $3,643 a year to insure their homes – nearly $1,338 above the national average – this increase could be devastating as people become unable to afford the protection.

Is there a solution?

While lawmakers are doing their best to clean up the mess, like passing reforms on AOB laws as recent as May 2022, the future of homeowners insurance in Florida is uncertain, to say the least. While new laws have not created much change, it is clear that no solution will produce immediate results.

What can Florida homeowners do to navigate through the chaos?

While there are no good or fast-acting solutions on the horizon, working with a qualified expert can help you navigate the tumultuous waters of the homeowner insurance crisis. With all of the threats and unpredictability, having someone to guide you in the right direction can keep you, your home, and your peace of mind safe and intact.

Chat with a Mulling Insurance expert today!

Sources: Forbes, Why is Homeowners Insurance in Florida such a Disaster?

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