Revealed - what's tearing apart Florida's homeowners' insurance market?

New report unveils sources of "manmade catastrophe"

Revealed - what's tearing apart Florida's homeowners' insurance market?

Insurance News

By Lyle Adriano

The Insurance Information Institute (Triple-i) has released a damning report which has warned that Florida’s current homeowners’ insurance market is “on the verge of failure,” thanks to rampant fraudulent roof repair schemes and excessive insurance litigation.

Triple-I found that thanks to the “manmade catastrophe” of fraudulent roof repair and overabundant insurance litigation in Florida, the annual cost of an average homeowners’ insurance policy in the state is skyrocketing to $4,231 in 2022 – which is almost three times more than the US annual average of $1,544.

It was also noted that while two major hurricanes made landfall in Florida since 2016 – 2017’s Irma and 2018’s Michael – there have been no direct hits over the past three hurricane seasons, from 2019 to 2021. And yet Florida accounts for 79% of all homeowners’ insurance lawsuits filed nationwide, and insurers operating in the state receive only 9% of all US homeowners’ insurance claims, based on data from Gov. Ron DeSantis’ office.

"Floridians pay the highest homeowners insurance premiums in the nation for reasons having little to do with their exposure to hurricanes," said Triple-I CEO Sean Kevelighan. "Floridians are seeing homeowners insurance become costlier and scarcer because for years the state has been the home of too much litigation and too many fraudulent roof replacement schemes. These two factors contributed enormously to the net underwriting losses Florida's homeowners insurers cumulatively incurred between 2016 and 2021."

Using data from the Florida Office of Insurance Regulation (OIR), 3D Supra reported that $51 billion was paid out by Florida insurers over a 10-year period. Of the $51 billion, 71% went to attorney’s fees and public adjusters. The 2020 and 2021 cumulative net underwriting losses for insurers operating in the state totaled over $1 billion each year.

"The state's homeowners’ insurers have been forced to respond to these unfortunate market trends this year by restricting new business, non-renewing existing policies and even canceling policies mid-term,” commented Kevelighan. “What's more, four homeowners’ insurance companies have been declared insolvent since February – all while more Americans are moving to Florida than any other state.”

Triple-I also brought attention to Citizens Property Insurance Corporation, the state-backed insurer of last resort, which saw its policy count rise to nearly 900,000 this month statewide.

The institute also noted that third-party rating bureaus have downgraded the financial ratings of some insurance companies in Florida, which puts even more pressure on the affordability and availability of homeowners insurance in the state.

A typical Florida homeowners’ insurance policyholder paid $2,505 for coverage in 2020, Triple-I said. But that amount has jumped to $3,181 in 2021, based on OIR, National Association of Insurance Commissioners (NAIC), and Triple-I's estimates of what insurers are paying for home replacement costs.

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