Florida may be experiencing one of the most significant influxes of new residents, but its also experiencing a mass departure - of insurance companies. Homeowners and property owners alike are receiving cancellation notices from their insurance carriers with no real warning. It's not just a few policies here and there either. Some insurance carriers are pulling out of the state of Florida entirely. Similar to when California wildfires led insurance carriers to flee, residents and businesses are scrambling to secure coverage for their property. But unlike in California, there has been no regulation put in place to stop insurance carriers from pulling out. Now, Florida property owners are at risk of losing coverage during high-risk times and seek new ways to protect their assets amidst the carrier cancellations.
Why Are Carriers Pulling Out of Florida?
Costs in Florida are rising at a rapid rate in a state that used to be known as a relatively affordable place to live. Rent has increased close to 15% YoY and is being compared to housing costs of major cities like Boston and New York. Along with the cost of living increases, the risk of damage to property has dramatically risen due to the severity of recent hurricanes and tropical storms. In fact, experts are estimating that Floridians are likely to see a 70% increase in flood damage by 2050 due to climate change. A large percentage of homes being sold along the coast in South Florida are unlikely to outlive their full-term mortgage. Rising sea levels are decreasing the value of waterfront property, but most people are turning a blind eye. Residents and business owners may be turning away from the impending risks, but insurance carriers are not.
Seven Insurance companies so far have pulled out of Florida entirely, including American Capital Assurance Corporation, Avatar Property, and Casualty Insurance Company, Florida Specialty Insurance Company, Gulfstream Property, and Casualty Insurance Company, Sawgrass Mutual Insurance Company, St. Johns Insurance Company, and Sunshine State Insurance Company. More large insurance companies are looking to pull out or highly reduce their underwriting in the state of Florida. Recent reports on Floridian carriers show that for every hundred dollars of the premium received by Florida insurers, they paid $117.50 in losses and expenses. So, the risk outweighs the profit for the majority of Florida property policies.
For those who haven't pulled from the state, their rates are increasing, by a lot. Carriers are seeing other companies pull out entirely, and are also just as aware of the risks their companies face by protecting vulnerable property. With the combination of increased home value and increased risk, rates are guaranteed to inflate.
A Subsidized Back-Up Plan
Property owners who were dropped by their carriers still need to secure coverage for their homes and business, and they're turning to Citizens Insurance. Citizens Insurance is subsidized by the state of Florida and has grown its number of policies by more than 600,000 since large carriers began to pull out. The company predicts it will reach 1 million policies by the end of 2022. Since the influx has drastically increased the service the company has provided, even they are requesting a reformation of the state premium costs that would hike the premiums by 11%. Lawmakers and political figures based in Florida know that the option to use subsidized insurance is not a long-term plan, but a short-term solution. They are working to impose regulations and legislation to improve access to quality property insurance.
Solutions for Florida’s Coverage Exodus
Aside from the Citizen's subsidized insurance option, there are other ways for property owners to secure coverage if their insurer recently filed a notice of cancellation. The first option is to shop around other carriers. Not all property underwriters are leaving the state, and even if the premium comes at a slightly higher cost than your prior policy, it's important to have coverage in high-risk areas. Call your agent and request quotes for participating carriers so you can compare plans and costs.
Another method of keeping coverage in the state is through the Florida Hurricane Catastrophe Fund. This fund was created in 1993 after Hurricane Andrew to provide additional coverage and market stabilization in the event of catastrophic losses. Insurers can, upon approval, access money from the fund to pay for repairs as a form of reinsurance. Though this fund hasn't really been touched since the early 2000s, it now has billions available and legislatures are considering opening it back up to keep carriers in the market.
Other methods of regulating coverage will likely fall in the hands of lawmakers and regulators. For instance, keeping standards of home maintenance at a higher level will lead to fewer high-cost losses in the long run. Additionally, increasing home inspections by insurance carriers and keeping all covered properties up to date on necessary maintenance will allow the carrier to properly assess the risk and decrease the chances of experiencing such high volume revenue losses. All of these actions are to bring insurance companies back into the Florida market and keep additional carriers from leaving. For now, keeping your property as protected as possible and shopping for stable carriers is the best way to keep your property covered.
Will Carriers Pull From Other States, Too?
With carriers pulling from states like California and now Florida, US citizens are concerned about the possibility of them pulling from other states as well. As of right now, there are no other states at high risk of losing property insurance. What we have learned from California and Florida is that cancellations happen in the face of extreme risks, so keeping an eye out on your state's risks will help you prepare for possible coverage loss or premium increase. In general, there is little need for concern if your state has never been faced with chronic high-risk weather or environmental risks.
Property Insurance With ECBM
Wondering if you have the right coverage for your property? Looking for experts in the industry to keep you up to date on all the latest insurance trends and changes that may affect you and your coverage? ECBM has agents and consultants to address all of your business insurance needs, no matter how complex. For more information on our services, contact a team member today.