Hurricane Ian is another blow to the Florida home insurance industry

For many Floridians whose homes were destroyed, they now face the daunting task of rebuilding after Hurricane Ian without insurance or paying even higher prices in an already struggling insurance market.

Even before Ian, the Florida home insurance market was dealing with billions of dollars in losses from a series of natural disasters, rampant litigation and growing fraud. The tough environment has put many insurers out of business and caused others to raise prices or tighten restrictions, making it harder for Floridians to get insurance.

Those who manage to insure their housing see their costs increase exponentially. Even before Hurricane Ian, the annual cost of an average homeowners insurance policy in Florida was expected to reach $4,231 in 2022, nearly three times the US average of $1,544.

“They’re paying more for less coverage,” said Florida insurance consumer advocate Tasha Carter. “This puts consumers in dire circumstances.”

Ron Audette removes waterlogged photos from the walls of his damaged home Tuesday in North Port, Florida. Residents were cleaning up after Hurricane Ian passed through the area last week. (Chris O’Meara/Associated Press)

Costs have gotten so high that some owners have waived coverage altogether. About 12% of Florida homeowners do not have home insurance, more than double the US average of 5%, according to the Insurance Information Institute, an insurance industry-funded research organization.

It’s a difficult problem even though the state consistently ranks at the top of net migration in the United States. Florida’s population grew to just under 21.8 million in the 12 months ending July 1, 2021, according to the US Census Bureau, with the state adding more than 211,000 residents. more inhabitants than a year earlier.

A flurry of lawsuits

The insurance industry in Florida has experienced two consecutive years of net underwriting losses exceeding $1 billion per year. A string of property insurers, including six so far this year, have gone insolvent, while others are leaving the state.

In July, 27 Florida insurers were on a state watch list for their precarious financial situation. Mark Friedlander, head of communications at the Insurance Information Institute, expects Hurricane Ian to tip at least some of them into insolvency.

A flooded trailer park is seen in Arcadia, Florida on Tuesday after Hurricane Ian caused widespread destruction last week. (Marco Bello/Reuters)

The insurance industry says overzealous litigation is partly to blame. Loopholes in Florida law, including fee multipliers that allow attorneys to charge higher fees for property insurance cases, have made Florida an overly litigious state, Friedlander said.

Florida currently averages about 100,000 lawsuits for home insurance claims per year, he said. That compares to just 3,600 in California, which has nearly double Florida’s population.

The state accounts for only 9% of all homeowners insurance claims in the United States, but 76% of homeowners insurance claims lawsuits nationwide, according to the Florida Office of Insurance Regulation,

“Plaintiffs’ attorneys in Florida have consistently found ways to circumvent all efforts to curb abuse of the legal system, making it likely that ongoing reforms will be needed to further stabilize the insurance market,” said Logan McFaddin of the American Property Casualty Insurance Association.

Widespread fraud, particularly among roofers, has also increased costs. Regulators say it’s common for contractors to go door to door to cover homeowners insurance deductible in exchange for submitting a full roof replacement claim to their property insurance company, claiming storm damage.

Things got so bad with insurance that Florida Governor Ron DeSantis called a special session in May to address the issues. New laws limit the rates lawyers can charge for certain property insurance claims and require insurers to insure homes with older roofs, which they had stopped doing due to the increase in property insurance claims. fraud.

The public insurer sees registrations soar

The legislation also includes a $150 million U.S. fund that will provide grants to homeowners to make upgrades to protect against hurricanes. But that program has yet to launch, and experts say it will take years to reverse the damage done to Florida’s insurance market.

Meanwhile, the crisis has pushed more homeowners to Citizens Property Insurance Corp., the state-backed insurer that sells home insurance to those who cannot be covered by private insurers.

Citizens had more than a million active policies as of September 23, before Ian struck, according to Citizens spokesman Michael Peltier. In 2019, that number was around 420,000. He said the company wrote 8,000 to 9,000 new fonts a week, double what it was a few years ago.

Even if they have home insurance, many Floridians could still face financial ruin from flooding. Flood damage is usually not covered by home insurance, but can be costly. The Florida Division of Emergency Management says 2.5 centimeters of floodwater can cause $25,000 in damage.

Friedlander said only 18% of Florida homeowners have flood insurance, either through the federal government’s National Flood Insurance Program or private insurers. That total masks wide variation – the rate in coastal areas is around 50%, while inland – where Ian’s floodwaters continued to rise even after the storm passed – it is closer to 5%.

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