AAA Becomes Latest Insurer Limiting Coverage in Florida

An abandoned, storm-smashed sailboat dumped outside a ship salvage yard on San Carlos Island near Ft. Myers Beach, Fla., in February 2023, five months after Hurricane Ian devastated Southwest Florida. John Haughey/The Epoch Times

The American Automobile Association (AAA) said that it will not be renewing home insurance policies for a small number of its Florida customers due to increased risk associated with extreme weather events as well as insurance fraud and abuse.

A spokesperson for AAA told The Epoch Times in an emailed statement that its Florida-based business has made the “difficult decision to not renew a very small percentage of higher exposure homeowner’s policies” in light of the impact of last year’s disastrous hurricane season.

“Evaluating risk and exposure management is a common part of the insurance industry,” the spokesperson said. “The catastrophic 2022 hurricane season drastically raised operational costs for providers.”

Wreckage remains on the mainland side of the Matlacha Pass Bridge to Pine Island five months after Category 4 Hurricane Ian ripped through Southwest Florida. John Haughey/The Epoch Times

‘Frivolous Litigation and Fraud’

Severe weather events in Florida—which is the most vulnerable state to hurricanes—have contributed to rising property insurance rates, with Florida having the most expensive home insurance policies on average in the country, according to the Insurance Information Institute.

But another key problem is that hurricane insurance fraud and abuse have made Florida’s homeowner insurance market less profitable.

“This is a man-made catastrophe,” Logan McFaddin, vice president of state government relations at the American Property Casualty Insurance Association (APCIA), told Yahoo Finance. “It’s not just the weather. It’s frivolous litigation and fraud.”

Several legal quirks in Florida, such as “one-way attorney fees” and the ability of policyholders to assign benefits to a third party that could sue on the policyholder’s behalf, have meant that the state’s insurance costs are much higher than other disaster-prone areas.

“Florida’s property insurance market has been chaotic since 2007, when bad public policy forced insurers to flee Florida,” Jeremy Redfern, Florida Gov. Ron DeSantis’s press secretary, told Yahoo Finance. “Since 2007, the main cost driver has been excessive litigation.”

Mr. DeSantis has called several special sessions and signed numerous pieces of legislation over the past four years to improve the property insurance landscape, according to Mr. Redfern.

Republican presidential candidate Florida Gov. Ron DeSantis speaks during the Moms for Liberty Joyful Warriors national summit at the Philadelphia Marriott Downtown in Philadelphia on June 30, 2023. Michael M. Santiago/Getty Images

Recent legislative moves to eliminate “one-way attorney fees” have sought to address at least part of the problem.

Mr. DeSantis recently signed into law House Bill 837, which sought to tackle some legal system abuse costs.

“By eliminating one-way attorney fees and fee multipliers for all lines of insurance, modernizing Florida’s bad faith law, and protecting small businesses from paying exorbitant damages, the reforms enacted will help restore fairness to Florida’s legal system, reduce the excessive number of frivolous lawsuits being filed, and ultimately help benefit consumers by increasing the availability and affordability of insurance over time,” APCIA said in a statement, praising the legislative reforms.

But while the legislation has been praised as key to attracting insurers back to Florida and lower costs for consumers, there are likely to be legal challenges ahead for years to come and so it could be some time before a positive impact is felt.

Insurer Exodus

Mark Friedlander, a spokesperson for Insurance Information Institute, told CNN that over the past year and a half, about 15 home insurers operating in Florida have stopped writing new business, and four have said they would voluntarily withdraw from the state. Another seven were declared insolvent, he added.

“Currently, there are 18 Florida residential insurers on the state regulator’s watch list due to concerns over their financial health,” Mr. Friedlander said.

But unlike some insurance companies, AAA’s Florida-based insurance provider is not leaving the state.

“In fact, we seek to continue growing our insurance business in Florida,” the spokesperson told The Epoch Times. “While other providers have either left the state or stopped writing new business; we continue writing new home and auto insurance policies.”

As for the “very small percentage” of non-renewals for home insurance policies, the spokesperson said that AAA agents are ready to help those affected find different providers.

“We acknowledge that this is a difficult time for those affected and encourage those affected to work with their AAA insurance agent, who can help identify alternate coverage,” the spokesperson said.

“This is a decision we do not take lightly, yet it’s an effort to ensure we’re in the best position to support the large majority of our policyholders this hurricane season,” the spokesperson added.

AAA’s decision to not to renew some policies comes on the heels of another major provider saying it will stop offering policies in Florida.

Farmers Insurance Pulls Out of Florida

Farmers Insurance said it will stop offering its policies in Florida, including for home and car insurance.

The company said it made the decision to manage its exposure to risk in Florida, which is especially prone to hurricanes and tropical storms.

The move will force tens of thousands of people to switch to a different insurance company.

A Farmers Insurance spokesperson said on July 12, “Affected customers will receive notifications detailing when their coverage will end and will be advised of options for replacement coverage.”

The company added that it was a “business decision” that is “necessary to effectively manage risk exposure.”

Jack Phillips contributed to this report.