Property Insurance Market – Courtesy: Shutterstock – Image by Alexander Raths
On Thursday, the hurricane season officially begins. However, no matter how many storms Florida experiences this year, individuals there are already having difficulty finding homeowner’s insurance.
In Florida, there is hardly any presence of national insurers. More than half of the market in the rest of the nation is dominated by large insurance companies. But according to the Insurance Information Institute, a trade association for the sector, State Farm only accounts for around 7 percent of the market in Florida. No other significant insurer has even 2 percent.
The local and regional insurers that are still around to offer coverage, however, are in poor shape. Due to their financial stability, hardly more than half of Florida-based insurers are on the state insurance regulator’s watch list. Another was forced to liquidate earlier this year, bringing the total to six last year. The surviving insurers are also charging premiums that are roughly four times higher than the national average in an effort to remain profitable. In the state, homeowners pay private insurers around $6,000 per year, as opposed to the $1,700 average for all Americans.
Insisting that storm danger to the state is only a portion of the issue, the insurance sector cites a judicial system that it alleges encouraged litigation abuse and excessive claims.
Mark Friedlander, a Florida-based representative for the Insurance Information Institute, declared that the crisis was “man-made.” The insurance industry fought for and secured a series of amendments intended to stop what it perceived as abuse, but so far they haven’t changed the picture for insurers. This is in part due to a deluge of roughly 300,000 cases that the III claimed were filed just before the law went into force.
Friedlander predicted that “that will muddy the market for years to come.” More of these local businesses will go out of business as a result of that number of lawsuits. The law has evolved. The state of the market has not changed. It is still a disaster.
Florida is particularly vulnerable to hurricane destruction because of its position and low height. The National Oceanic and Atmospheric Administration predicts that the Atlantic hurricane season will be around average this year, with a 30% possibility of an above-average season and a 30 percent likelihood of fewer hurricanes than average.
The previous year wasn’t good. According to NOAA, Hurricane Ian last fall caused $114 billion in damage in inflation-adjusted terms, making it the most expensive storm to ever strike the state and the third most costly in US history behind 2005’s Katrina and 2017’s Harvey.
However, Florida has often been spared in recent years; from 2019 to 2021, no storms made landfall in the state.
A large portion of storm damage takes the form of flood damage, which is covered by the National Flood Insurance Program, a federal entity rather than by private insurers. However, homeowner’s insurance policies cover wind damage to roofs and to homes.
Trial lawyers contest that frivolous or fraudulent litigation is the root of the issue and place the blame on the state’s inadequate oversight of the insurance sector.
“We’ve seen reform after reform. Insurance companies have been allowed to plunder profits from the state in the form of excessive payouts to executives and sister companies and by shortchanging policyholders,” said Stephen Cain, president-elect of the trade group representing Florida trial lawyers. “The homeowner’s insurance crisis is a regulatory failure. Had the market been properly regulated through the good years, when there were no hurricanes, the abusive and undercapitalized companies would not have been let loose on the homeowners of Florida while their executives plundered the profits.”
Even Friedlander acknowledged that it is likely that some homeowners won’t be able to pursue valid claims due to the new legal limitations. To the extent it does occur, he added, “it’s because of the abuse that has gone on for so many years.”
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Chris began his writing as a hobby while attending Florida Southern College in Lakeland, Florida. Today he and his wife live in the Orlando area with their three children and dog.
