Risk and Resilience: A Closer Look at Florida’s Property Insurance Market

Florida’s reputation for being the sunshine state has harshly contradicted its gloomy insurance predicament. Rising premiums, insurer insolvencies, and catastrophic weather events converged to create a perfect storm for residents. Just in the last few years, the cost of property insurance in Florida surged by 102%, now three times more than the national average, reports the Insurance Information Institute. Property owners have experienced a significant increase in their insurance premiums, making it financially challenging for some and unmanageable for many. As state leaders have begun to implement reform, positive change seems to be on the horizon, which will hopefully make a long-term difference. In the meantime, let’s delve into the roots of the crisis and creative suggestions for the current market.

Florida’s Insurance Crisis:

1. Increased Claims; Higher Premiums: According to National Association of Insurance Commissioners (NAIC) data mined by the Florida Office of Insurance Regulation, homeowners’ insurance lawsuits in Florida once accounted for more than 76% of all litigation against insurers nationwide. Insurance companies faced higher litigation payouts than anticipated, resulting in unprofitable margins. Hence, raising rates and reducing capacity to improve profitability, resulting in a supply and demand imbalance.
2. Fewer Insurers: The Florida Department of Financial Services lists 14 companies in liquidation. Additionally, the heightened risk exposure in this hurricane-prone state has prompted many insurers to exit the state entirely. Notably, Farmers, a major insurer, recently withdrew coverage from Florida due to risk concerns.
3. Catastrophic Weather Events: With the costliest storm (Hurricane Ian, 2022) to ever hit the state, Florida continues to face escalating risks from rising sea levels and more frequent extreme weather events. Another active hurricane season is predicted for 2024.

Proactive Reform:

1. Legislative Reforms: In 2023, the FL legislature enacted laws to curb insurance rate increases. While revisions are starting to show a positive impact on claims with carriers, legal reforms aimed at reducing the high number of lawsuits in Florida could help mitigate losses for insurers and affect the market favorably. Revisiting state-imposed rate hike limitations could also encourage insurers to remain in the market.
2. Climate Resilience: Modernizing building codes could help build better communities and additional capacity. Establishing bipartisan requirements to building codes that strengthen and reinforce existing structures (not just new construction), to withstand extreme weather events like flooding and wind is paramount. While educating homeowners about climate risks and promoting property mitigation efforts is crucial.

Solutions:

1. Stay Informed: The Florida home insurance crisis transcends mere economics; it poses a threat to the stability and security of thousands of families. Whether purchasing a new property or remarketing your existing property insurance, staying informed on legislation and the marketplace is critical.
2. Review All Options: Find ways to safeguard. Mitigating properties to prevent damage, adding superior alarms for additional discounts (water leak detection, lightning protection, or installation of permanent generators), choosing the right location, and reviewing the marketplace are key to a successful insurance program.
3. Choose A Knowledgeable Broker: EPIC advisors stand ready to address your insurance and risk management needs. Finding a knowledgeable broker that has broad marketing capabilities is important. At EPIC, our national footprint includes a regional Boca Raton, Florida location, which enhances our expertise and carrier choices. For more information, visit our Private Risk page or contact us directly.