Homeowners insurance in Florida has always been a bit of a calamity. There is a long history of dwindling homeowners’ insurance availability in the Sunshine State, and we’d like to take some time to offer some information as to what and why there is trouble in the insurance world in the state of Florida.

It’s no secret that insurance in Florida is expensive, and options are limited. Unfortunately, buyers are often shocked by the lack of options. Condos, co-ops, and houses must be windstorm compliant in order to qualify. Many homeowners wind-up purchasing insurance coverage with Citizens (known as the company of last resort), or Florida-based start-up companies that are not rated by A.M. Best. These companies do not have well-established claims practices, as many are new and have only been in business for 10 years or less. As of the time, we wrote this article, 27 Florida-based property insurance companies are being downgraded by Demotech

No state has suffered from storms more than Florida. According to the Insurance Institute, After Hurricane Andrew struck Florida in 1992, 16 insurers filed for bankruptcy as claims swamped insurers. After huge losses from hurricanes that struck in back-to-back years, 2004 and 2005, State Farm, the largest insurer in Florida, announced it would stop selling property insurance in Florida. Other major carriers such as Allstate and Travelers quickly followed their lead. Hurricane Irma in 2017 and Hurricane Michael in 2018 generated about $30 billion of claims combined.

This history has greatly contributed to the current insurance crisis occurring in the state. Additionally, there is a limited amount of coverage available. Virtually every Florida homeowner, regardless of their personal loss history, is experiencing double-digit percentage increases upon renewal of their policy. Insurers are set to cancel more than 68,000 policies in the State of Florida this year alone. Standard insurance carriers offering coverage in the state of Florida, which are few and far between, are fleeing the state leaving few choices for the homeowner. The carriers that will extend coverage to Florida homeowners reserve their capacity for only the cleanest accounts.

In fact, since the beginning of this year, 4 insurance companies in Florida have filed for bankruptcy, making a total of 9 companies in liquidation. Most standard insurers have pulled their business from the state of Florida. In their place, there is a multitude of small local insurers that do not have any financial rating with A.M. Best. There is a secondary insurance market of non-admitted insurance carriers that are not backed by the Florida Insurance guaranty, that offer the costliest insurance solutions.

State-licensed Florida insurers are backed up to $300,000 by the Florida Insurance Guaranty Association (FIGA). However, insolvency can lead to LONG delays in the claims process and resolution can take years. To make matters worse, Excess and Surplus line carriers like Lloyds, and Lexington are not backed by FIGA.

The insurance industry has been turned on its head by the real estate buying spree spurred by the pandemic. Buyers have been flocking to coastal areas (Miami Beach, Boca Raton, Del Ray on the East coast, and Naples on the Gulf coast), are at the top of the list of desirable locations. While a booming real estate market may seem like good news, the condition of the property insurance industry in the state is troublesome. Those who have recently moved to Florida are facing major sticker shock with premiums much higher than expected. In fact, Florida is the most expensive state in the United States for home insurance.

Longtime homeowners are also feeling the pinch. Many are facing double-digit rate increases and policies that cannot be renewed.

Florida, the Sunshine Hurricane State will always be prone to natural disasters, but that is only part of the problem. The state is also dealing with roofing scams, out-of-control litigation costs, and the rising cost of re-insurance.

The biggest issue the insurance carriers are facing right now is insurance fraud. The fraudulent claims are driven by roofing scams. The scam begins when roofers canvas a neighborhood after a storm and find damage. They make lofty promises to homeowners such as free roofs because they will be able to get the homeowner’s insurance deductible waived. Homeowners feel the pressure and sign an Assignment Of Benefits form so that the contractor can file the claim on their behalf. Once the claims process has been started, an insurance adjuster sent by the insurance company comes to the home and finds minimal (or no) damage and proposes to pay out less than the claim. The contractor then sues the insurance company.

The roofing scam we detailed above, has led to out-of-control lawsuits against insurance companies. When faced with a fraudulent claim the insurance company is faced with a difficult choice, they can either pay the legal fees to fight the lawsuit or settle out of court. It is such a problem that Florida lawmakers held a special session and put legislation in place to help provide some relief but much of the bill is still tied up in court.

In addition to any catastrophes that are yet to occur, Florida has experienced enormous increases in the cost of re-insurance. Re-insurance is insurance for insurers to help pay out damages after a storm. It is a way for the insurance company to insulate itself from the risk of a major weather event. The increase in the cost of re-insurance is happening nationwide, but more so in Florida.

The bottom line is that we will obsess about your insurance coverage. We strive each day to ensure that we are offering the best possible insurance coverage for your individual needs.

There is a silver lining, although we make no promises, once you have secured insurance, the State of Florida makes it difficult for insurers to cancel you.

We believe in educating each client we serve. By providing knowledge, you are better able to make informed decisions. That is why we provide articles to help you better understand what is happening throughout the insurance market and are always here to answer any questions you may have. We truly have your best interests at heart, after all, for all of us here at Advocate Insurance, it is about more than insurance, it’s about you!

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