Florida homeowners who need property insurance to qualify for a mortgage have found the last few years increasingly challenging in terms of cost and availability for that coverage.
Many insurers left the market, even before the state was battered by a succession of devastating hurricanes including Irma in 2017, Ian in 2022 and Idalia in 2023. Floridians are paying the highest average premiums in the U.S.—an average of $6,000 annually— according to Mark Friedlander, corporate communications director for the Insurance Information Institute (Triple I), an industry association based in New York City.
“That is triple the U.S. average, which is running under $2,000,” Friedlander, who is based in Florida for Triple I, said in a recent phone interview. “And over the past three years alone, the cumulative increases for Florida homeowners have been over 100%.”
As costs skyrocketed and availability of private insurance diminished, the state-backed Citizens Property Insurance Corp.—typically described as the “insurer of last resort”—grew to be the largest residential insurer in Florida.
According to Tasha Carter, insurance consumer advocate in the state’s Department of Financial Services, Citizens can write a new insurance policy under two circumstances: when a homeowner is not able to find coverage from a state-authorized insurance company when they otherwise meet all of Citizens’ underwriting requirements; or if the premium for coverage from a state-authorized insurance company is 20% or more higher than the premium for comparable coverage from Citizens.
Carter said she remains concerned about availability and affordability of homeowners insurance, but is encouraged by recent legislation.
Recent reforms and what they mean
The issues, Carter said, are threefold: Many insurance companies choose not to write homeowners insurance policies in what they determine are high-risk areas or for certain types of homes, or are pulling out of the state altogether. In some cases, such as United Property & Casualty Insurance Co., the insurer has gone insolvent.
Much of the consumer-oriented legislation is for homeowners who already have insurance. One of the pieces of legislation passed during the session earlier this year will at least warn homeowners of an impending pullout: It requires insurance companies to notify the Florida Office of Insurance Regulation when they decide that they are going to stop writing business in Florida.
“That primarily was born out of the situation where companies were simply announcing, through the media or through their own communication channels, that they were going to be pulling out of the market,” Carter said.
“Some of the recent legislation that I think is very consumer-focused and beneficial for consumers prohibits insurance companies from denying coverage based on the age of a roof that is less than 15 years old. I think that’s significant,” she said. “The Legislature also passed legislation in an effort to resolve and pay claims quicker (prompt payment laws). So now insurance companies are required to pay the undisputed amount of the claim, or either deny the claim, within 60 days.”
The insurance consumer advocate said that legislation also reduced the timeframe for an insurance company to acknowledge and investigate a claim or conduct an inspection, and to send an adjustor’s report.
“I think the legislation relative to the prohibition centered around the use of assignment and benefits and residential and auto claims is also very significant,” she said. “Prior to the prohibition, ‘bad actors’ were utilizing the assignment of benefits process to really take control of the insurance claim process away from the policy holder. And they were making a lot of decisions that were in the best interest of the bad actor instead of the best interest of the policy holder.
“Another piece of legislation that is definitely beneficial for consumers is the My Safe FL Home program, which provides funds to obtain free hurricane mitigation inspections and matching grants,” she said. “For those consumers who essentially add those mitigation features to their home, for each dollar spent on mitigation improvement, the program provides two dollars, up to a maximum of $10,000. It not only strengthens your home and protects your home against future storms and damage, but of course it will also result in a reduction in your homeowner’s insurance premium.”
Friedlander of Triple I noted that as of a couple of months ago, Citizens’ numbers have slowly started to come down, which he attributes to the legislation passed in December 2022 that addressed legal system abuse and claim fraud issues by banning one-way attorney fees and assignment of benefits for property claims. He said this makes the state more attractive for new insurance companies.
“That was kind of the first phase of getting Florida’s property insurance market back on track,” Friedlander said. “It wasn’t an immediate fix by any means, but they were steps that were needed because the Florida property insurance market, the residential market, is primarily smaller regional insurers that only write one type of business—homeowners.
“Eighty percent of the Florida market is smaller regional insurers that are obviously less capitalized than the bigger insurers. They can’t absorb the expenses of fighting legal system abuse and claim fraud. And that’s what drove the six companies out of business [in 2022].”
Shelton Weeks, Lucas Professor of Real Estate in the Lutgert College of Business at Florida Gulf Coast University, said he thinks it is probably too early to really say if the tort reforms have helped stabilize the market and provide relief to consumers. “I think that ultimately it will help us because I do believe that it will make Florida a more attractive place for insurance companies to do business,” Weeks said, “and ultimately that will help the consumer.”
Michael DeLong, a research and advocacy associate at Consumer Federation of America, said his impression is that the new tort reforms may slightly help consumers, but are not addressing the underlying problems.
“We think that while there are abuses in lawsuits and litigation that need to be corrected, we also think that litigation can play an important role because it allows consumers who have been unfairly treated by insurance companies to recover damages and to fight back in court against their mistreatment,” DeLong said. “And the deck is already stacked against consumers, because most of them tend to be individual consumers who don’t have resources; and insurance companies are large, have a lot of money and time and can hire very expensive lawyers.”
Carter and Friedlander both noted that the state insurance regulator has recently approved six new companies to come into Florida to write home insurance policies and is talking to others. Friedlander said it is his understanding that the new companies will start writing business in the state in early 2024. (See sidebar.)
Friedlander said Citizens’ policy count has reduced as insurance companies have participated in a “depopulation” program and assumed nearly 100,000 policies from Citizens just during the month of October 2023.
“I think that by those new insurance companies expressing an interest to come into the Florida insurance marketplace, and current insurance companies who have agreed to assume policies from Citizens, I think all of those really indicate a more optimistic view of the marketplace.”
Friedlander said that confidence on the part of other insurance carriers is important because Citizens is rate-restricted, meaning regulations do not allow it to charge actuarially sound rates.
“They need to charge below-market rates,” he said. “So, in other words, every time they write a policy, their risk exposure is growing because they’re not charging enough premium to cover that risk, and the gap is roughly 30 to 40% is what we’ve estimated below market. That’s just a roadmap to failure, because if Citizens gets in a position where they have a major storm loss and have to pay out all these claims, they are allowed to implement a surcharge program, where every Florida consumer would be on the hook to help replenish the funds of Citizens.
“On top of the largest average premium we’re already paying in Florida, you would get a surcharge on top of that. And not only would that be for homeowners, it would be for everybody who has insurance in Florida. If you have a car insurance policy, you would get a surcharge on that to help pay Citizens’ home insurance claims.”
Friedlander said that with the monthly depopulation program happening, Citizens is below 1.3 million customers and going in the right direction.
“Several private insurers are offering ‘takeouts’ to Citizens’ customers to take on their policies,” he said. “Customers get a takeout offer from a private insurer, and sometimes multiple offers. If it’s within 20% of what your Citizens premium renewal rate will be, you must either accept the offer or find other coverage, because according to new state regulations, you can’t stay with Citizens. If it’s over 20%, you could stay; you’re not forced to leave.”
He said there were about 200,000 takeout offers presented in November, and roughly half of those were accepted.
However, DeLong of Consumer Federation of America said he has concerns about the potential longevity of some of the new insurers in the market.
“It’s a good thing that there are more insurance companies in the market, especially with the lack of availability and affordability of insurance in Florida,” DeLong said. “But the problem is, these companies have entered the market and they’re now offering policies, but will they be able to stay in long term? When the next hurricane comes and there’s a lot of damage, and they have to pay out a lot of claims, will they have managed themselves wisely and will they be able to keep offering policies? Or will they get overwhelmed with a flood of claims and go insolvent, go bankrupt and you won’t have those insurance companies anymore? So that’s the real problem.”
Pro advice for insurance hunters
Given the continued challenges in the insurance market, The Naples Press asked Carter, DeLong and several insurance watchers—including a mortgage broker, two insurance agents and a real estate professor at Florida Gulf Coast University—to offer guidance for insurance hunters. Most of them emphasized there were savings in looking for the highest deductible you could afford and looking for items you could unbundle from your insurance, such as furnishings; and they all advocated for comparing a variety of options. Below are additional tips from the panel of insurance experts.
Florida insurance consumer advocate Tasha Carter:
• “Review the financial rating of the insurance companies that you are obtaining quotes from. You want to be sure that you can rely upon that company to pay claims.”
• “Take advantage of policy discounts to lower your premium. Most companies offer discounts for a variety of different items, such as if you bundle your home and auto policies, or if you have a security system or other features on your home. Make sure that, when you are obtaining quotes from insurance companies, that you’re also asking for a list of their policy discounts.”
• “Strengthen your home by installing hurricane mitigation features such as impact-resistant windows and doors or adding clips or straps to strengthen your roof to all connections and reinforcement to your garage doors.” It makes you potentially eligible for insurance discounts and also strengthens your home against damage, she said.
Michael DeLong at Consumer Federation of America:
• DeLong encourages potential buyers to “look at the lay of the land” where you’re buying. “Has this place been subject to floods before? Is it close to the water? And if a place is extremely risky—like, say, a barrier island or low-lying areas on the coast—you should take that into account. Consider, perhaps, [trying to] find a place that is somewhat less vulnerable to hurricanes or flooding or storms.”
• “If you feel that you have been unfairly treated by your insurance company, don’t hesitate to reach out and file a complaint with the Florida Office of Insurance Regulation.”
• “Encourage your state legislators and the governor to recognize this is a crisis and you need to take measures to make insurance more affordable and accessible.”
Chris Mitchell, agency owner with Brightway Insurance, Smith & Mitchell Agency of Naples:
• “Weigh the consequences of filing a claim for minor damages. Let’s say you had an appliance leak, and you find out the damage is going to be $4,000, and your deductible is $2,500. When you think about the potential consequences of that in this hard market, it’s worth considering, ‘OK, do I really want to file this and risk having a reason to be non-renewed?’”
• “Always check around to see if there are options for you to adjust your coverage or deductibles. Nobody has all the carriers, so it’s worth looking around periodically, especially when you’re dealing with high premiums like this.”
Pete Moran, division manager for Moran Mortgage Team of First Premier Mortgage in Naples:
• “Work with a good insurance agent, preferably a broker who has options, who has relationships with 15 or 20 different insurance companies.”
• “Consider how much coverage is needed. You have to also approach it with respect to maybe you don’t get as much coverage, since less coverage means a lower premium.” It’s a tradeoff, he said.
• “Get a wind mitigation report and a fourpoint inspection, potentially, because that could help lower the insurance premiums.”
• “Look at properties that are newly built. Newer construction is a lot less expensive to insure than some of the older properties out there.”
Mike Ryba, principal agent at Pro-Active Insurance Management:
• “Maintain your home, especially the four points of primary concern for all insurance underwriters: roof; plumbing; heating, ventilation, air conditioning systems; electrical system/electrical panel. Make sure all of those things are in good repair or updated as often would be prudent—then it’s much more likely that you will get an approval from underwriting for more competitive pricing.”
• Ryba also suggested keeping a close eye on tree limbs that can fall and damage roofs. “Those types of claims can be prevented by maintaining the trees around your home. The insurance industry is going to make you do it. They will say, ‘Get all those branches or trees away from your home, and we’ll consider. But until that time, no can do.’”
Shelton Weeks, Lutgert College of Business at FGCU:
• Weeks said he thinks preparation— and starting on the process early—can be key to consumers’ success in finding the right policy. “The first thing you’ve got to do is be an educated consumer. I know everybody’s really tired of having to deal with insurance and worrying about this. It’s stressful, and a lot of times we have a tendency to procrastinate and put those things off because it’s not fun. But reach out early and get pricing from as many places as you possibly can.”
• “Do your homework so you know what you’re buying and understand the risk that you’re going to accept depending on the type of policy that you end up purchasing.”