MIAMI – Florida’s property insurance market faces a crisis as rising carrier losses and rising premiums threaten the state’s booming real estate market, according to insurance managers and industry analysts.
Longtime homeowners face double digit rate increases or notice their policies are not being renewed. Out of state home buyers who moved to Florida during the pandemic are experiencing sticker shock. Insurers swimming in red ink are reducing coverage in certain geographic areas to support their finances.
Various factors play a role, say insurance managers and analysts. Two hurricanes that devastated the state – Irma in 2017 and Michael in 2018 – caused claims at an estimated cost of about $ 30 billion. The cost of reinsurance that insurers take out to cover some of the risk of the policies they sell is increasing. Of particular concern, executives say, is excessive litigation over insurance claims and an increase in what insurers are viewing as bogus claims.
A large group of Florida homeowner insurers tracked by Marsh McLennan‘s
The Guy Carpenter deal recorded underwriting losses of $ 1.58 billion in 2020, more than double the $ 664 million loss in 2019.
“The industry is panicking because it is losing so much,” said Barry Gilway, general manager of Citizens Property Insurance Corp., a state-backed insurer of last resort that is growing rapidly as private insurers pull out. Subject to changes, “interest rates will continue to skyrocket and have an absolute impact on the real estate market.”
The guidelines for Eric Firestone’s home in the Miami area were not renewed this year.
Eric Firestone, a 37-year-old teacher who lives in the Miami area with his wife, received a letter from his insurance company in February saying that his policy would not be renewed because the carrier is no longer serving their area . When her insurance agent looked for an alternative, the cheapest she could find had an annual premium of $ 9,644 – an 85% increase from the previous premium of $ 5,205.
“Where can I get the extra $ 4,000?” Mr. Firestone said. “In the worst case scenario, I’ll have to run into credit card debt.”
“The industry is panicking because it is losing so much.”
Florida is the most expensive state in the US for home insurance. Insurance Information Institute trade group estimates that residents are expected to pay an average of $ 2,380 in premiums this year, up 21% from the $ 1,960 paid in 2018. In contrast, the average American homeowner is expected to pay $ 1,297 this year, up 4% from $ 1,249 in 2018.
Of 105 multi-risk homeowner insurance policy rate increases approved by the Florida Office of Insurance Regulation last year, more than half were over 10%, compared to six out of 64 in 2016, state Insurance Commissioner David Altmaier told lawmakers With.
Ana Regina Myrrha, an insurance agent in the Orlando area, said she hired three more people because customer policies that used to be auto-renewal now require a “re-offer” or the search for cheaper alternatives. Her office earlier told customers to expect a single-digit rate hike on renewal, but “we’re telling them now that a 20% increase is a gift.”
Roof repair claims are a sore point for Florida insurers.
Florida lawmakers are considering bills that supporters say would help curb premium hikes. Provisions of a Senate measure, backed by the insurance industry and passed by the Republican-led chamber, include restrictions on legal fees and roof coverage, which proponents say would reduce the incentives for frivolous lawsuits and claims.
A measure in the GOP-led house, which is classified as weaker by industry representatives, is expected to be voted on in the next few days. If so, the legislature will have until the end of the April 30th session to negotiate a compromise.
Many of the plaintiffs’s Democrats and lawyers oppose the bills, saying they will harm consumers by restricting legal recourse against insurance companies. Opponents say the insurance industry is exaggerating the role of fraud in worsening its finances and downplaying the importance of losses from natural disasters and rising reinsurance rates.
While Florida accounted for 8% of all homeowner insurance claims in the U.S. in 2019, an analysis by Mr. Altmaier’s office accounted for 76% of homeowner’s insurance claims.
A survey by his office of Florida insurers, who represent about 60% of the market, found that they received 90,950 roof damage in 2020, up from 56,657 in 2019. Questionable claims often involve alleged roof damage from hail or wind, which the Adjusters address and engineers from transportation companies instead close due to normal wear and tear, which industry executives say is uninsured.
In Florida, as in other states, policyholders with disputed claims can sue their insurers. Critics say Florida law currently allows too easy access to legal fees paid by insurers, encouraging contractors to drum up businesses and attorneys to file frivolous claims and claim legal fees.
“Let me help you get a new roof through insurance!” reads a door hanger that Mr. Altmaier shared with the legislature.
Alexander Barr outside his home in Davie, Florida. He must expect a premium increase of 63%.
Mandy Wells, 40, a real estate agent in Cape Coral, met with a representative from roofing company Marlin Construction in 2019 regarding storm damage. The rep guided her filing a claim and said she would get a new roof, according to Ms. Wells. She signed an agreement authorizing Marlin to receive payments direct from the insurer.
But Ms. Wells said Marlin, who has filed numerous complaints with the Better Business Bureau, never did any work and dropped out of contact when she refused to sign additional documents. Scott Hertz, a Marlin attorney, said Ms. Wells cut off Marlin after receiving an insurance payment and the parties are now involved in litigation, in part over that money. He said the complaints against Marlin are mostly related to the employee who met with Ms. Wells, who is no longer with the company.
Although Florida’s real estate market continues to be strong, rising insurance premiums could hold it back, real estate agents say. Some out of state shoppers flocking to Florida say they are stunned by their insurance bills.
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Ricardo Calina, 45, a former Wisconsin resident who closed a home in Winter Garden, near Orlando, in January, said he was upset that he and his wife would pay around 25% more for homeowner insurance Although the 4,500 square foot Florida property is 500 square feet smaller than their Wisconsin residence.
“It’s frustrating that we pay more for less,” said Calina.
Meanwhile, in Davie, near Fort Lauderdale, Alexander Barr worries about getting an award from the house he grew up in and is now raising his two children with his wife. Earlier this month, they received a renewal notice from their insurance company informing them that their premium had increased to $ 4,006, a 63% increase from the $ 2,451 they paid last year.
“I can only imagine what will happen next year,” said Barr.
Single family homes in Miami. Florida’s real estate market has attracted buyers during the pandemic.
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