It’s been said that two things in life are certain – death and taxes. But in Florida, skyrocketing insurance rates may need to be added to the list. Homeowners across the state are watching helplessly as their rates soar.
The Florida Office of Insurance Regulation (FOIR) recently approved a 21.9% average increase. The new rates went into effect on February 15th for new policies and March 24th for renewals, according to the Insurance Journal. For Ormond Beach homeowners like Nella Garcia that translates into a $700 hike.
There are a few factors at play that have resulted in these sweeping rate hikes. Alexis Bakofsky, director of communication for FOIR notes, “The market is currently facing significant challenges as the frequency of claims increases and those claims become more expensive.” She continues, “These challenges are largely due to increased litigation, exacerbated by higher catastrophe claim losses as a result of multiple hurricanes over the past several years and rising reinsurance costs as a result of a hardening reinsurance market.”
Increased Litigation is Leading to Higher Homeowners Insurance Rates
Non-storm-related claims for roof and water leaks are a surprising driver of Florida’s high litigation rates. According to an analysis by the National Association of Insurance Commissioners, more than 76% of all litigation against insurers in the U.S. in 2019 was in Florida.
Much of the litigation is the result of contractors and agents racking up huge repair bills and then suing for payment. In fact, there have been incidents of contractors directly soliciting roof damage claims from homeowners. As a result, policies in these areas are being dropped and the premiums for the remaining policies are being increased.
Old Storms Are Still Bringing New Claims
In Florida, homeowners have up to three years to file claims for storm-related damage. So, property owners were still filing claims for 2017’s Hurricane Irma when Hurricane Michael hit one year later. Irma resulted in $9.54 billion more in insured losses than the Category 5 Michael, despite Irma’s lower Category 4 ranking according to FOIR. Insurance companies are finding it hard to keep up with claims with their old, lower insurance rates.
Insurance Companies Are Paying Higher Rates ss Well
Florida insurers are experiencing higher rates for reinsurance and that cost is being passed onto homeowners. Reinsurance is the practice of insurance companies sharing their risk by transferring portions of their portfolios to other parties. Simply put, it’s like insurance to back up the insurers.
Reinsurance News reports, “Data from Hyperion X Analytics reveals that property catastrophe reinsurance rates-on-line increased by an estimated 26.1% at the June 1st, 2020 reinsurance renewals.” Florida homeowners are paying for this increase on their end.
Florida Homeowners Can Take Steps to Avoid Rising Insurance Rates
All hope is not lost for Florida homeowners looking for affordable insurance. There are ways to avoid or at least mitigate the state’s rising rates.
- Compare rates in your area. FOIR notes that rates can vary greatly for reasons beyond just geographic location. Factors like the type of construction, the value of the home, mitigation features, and the amount of deductibles all have an effect on the rate you will pay. You can use FOIR’s Homeowners Rate Comparison Tool to determine the best rate available for you.
- Be proactive with your home maintenance. Repairing and maintaining your home’s infrastructure and mechanical components can help reduce your insurance rates. Make sure your water heater, air conditioner, and plumbing are in working order, and make plans to replace them before they become a hazard to your home.
- Make stormproof upgrades. Installing a fortified roof, hurricane shutters, or impact-resistant windows will all have a positive impact on your insurance premium.
Property owners who are frustrated with the increase in their insurance rate can investigate insurance through Citizens Property Insurance. Citizens were created by the Florida Legislature in 2002 to provide property insurance to Florida homeowners who were unable to secure private insurance elsewhere. However, the program, hoping to curb its recent growth (Citizens is currently the second-largest insurance provider in the state), is also considering raising its rates.
Citizens President and CEO Barry Gilway said at a board meeting. “We know that a healthy private market reduces Citizens’ size, and in an unhealthy private market we’re going to grow.” To ensure the private market stabilizes the state will need to address the high rates of litigation and non-storm-related claims.