The price of home insurance in Florida has been soaring. And the skyrocketing premiums, in some cases doubling over the past three years, aren’t enough.
A few insurance companies, including Farmers Insurance, have stopped underwriting most types of property or auto insurance in the state.
There are many culprits to this problem. While we won’t speculate on the cause, destructive hurricanes have increased in both number and severity in recent years. Last year’s Hurricane Ian was the costliest storm in the state’s history.
But extreme weather is only part of the issue. Another frequently cited cause is insurance litigation. Florida represents just 9 percent of all homeowner insurance claims in the United States, according to data from the Florida governor’s office, which means that despite the reputation for destructive hurricanes, insurance claims aren’t exorbitantly high.
However, Florida represents almost 80 percent of the country’s insurance litigation, meaning that homeowners there are fairly quick to sue their insurance companies compared to other states.
Some also believe that this is a ploy by the insurance industry—and broader political forces outside of Florida—to undermine Florida’s attractiveness as a migration destination and to fight back against Republican Gov. Ron DeSantis’s politics. Perhaps insurance companies are “greedier” when it comes to insuring Florida’s homeowners—hoping to extract more profits from their customers in Florida than in other states.
Whatever the reason, Floridians are paying higher premiums on their insurance. And as more insurance companies leave, demand exceeds supply and premiums go up more. In some cases, the burden of providing insurance is falling on the state’s “insurer of last resort,” the state-owned Citizens Property Insurance. And as the calendar heads into the annual hurricane season, one more destructive hurricane may force rates to go up even more and cause more small insurers to go insolvent.
How should homeowners think about the rising insurance costs in Florida?
First, this isn’t a political issue. Florida’s Democratic legislators are quick to pin the blame on Mr. DeSantis. But the reality is that the underlying factors causing Florida’s insurance premium increase are beyond the powers of any governor, state insurance commissioner, or legislator. No elected official, from any party, can change the state’s geography or its weather patterns.
Regarding the litigious environment, one part of the equation is homeowners and their lawyers. Florida’s state Legislature has also enacted laws effective late last year to lessen the burden on insurance companies, such as eliminating the requirement for insurers to pay for the cost of the homeowner’s lawyers should the homeowner win a lawsuit.
The state’s Legislature in 2023 also introduced a law to end “assignment of benefits” and certain other abuses practiced by “some of Florida’s politically powerful personal injury lawyers,” according to the Miami Herald. But before Mr. DeSantis was able to sign this into law, lawyers in Florida filed 70,000 new suits that would be handled under the old laws, which were far more favorable to plaintiffs.
Lawyers are going to lawyer, apparently.
The largest contributor to the insurance crisis—which is rarely mentioned as the biggest driver—is inflation. The Biden administration’s COVID-19, energy, and federal spending policies had created supply chain issues and driven up prices. The prices required to repair, fix, and construct homes have all gone up. If one’s home is destroyed, the insurance company must pay current market rates for materials and labor to reconstruct the home.
These risks, however, continue to go up. Insurance companies are looking at their income statements, and meteorologists believe that there will be high hurricane activity this fall. Will these risks dent the parade of new migration into Florida? Time will tell.
