Insuring a home in Florida got a little bit more difficult this week after AAA joined a growing list of companies that are ending some homeowner insurance policies in Florida.
The Florida-based insurer will not renew package policies that combine home, automobile and optional umbrella coverage, according to the Palm Beach Post, part of the USA TODAY Network. With hurricane season around the corner and drastically fewer insurance offerings, this could leave some vulnerable.
While AAA's move will only affect a “small number” of policyholders, the news was almost swept away in the deluge of news following Farmers Insurance's surprise announcement that it is pulling out of the state.
The back-to-back announcements underscore the insurance crisis Florida residents have been facing for the past 18 months.
And it's a crisis that's largely manmade, according to Mark Friedlander, spokesperson for the Insurance Information Institute, as several local insurance providers folded and three national insurers have withdrawn from the state. Despite recent legislation intended to alleviate the problems fueling the crisis, he said the market volatility persists.
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“Case in point, insurers are making decisions to pull back on risk and AAA is certainly a recent example of that,” said Friedlander.
Here is how Florida got to this point and what it could mean for residents.
The crisis is manmade because it is largely fueled by frivolous lawsuits and fraudulent insurance claims, Friedlander said. A 2017 Florida Supreme Court ruling in favor of plaintiffs opened the door for a large volume of roofing scams and claim litigation. During the last three years, 80% of property claim lawsuits in the country have been in Florida, compared to just 9% of the claims.
The litigation costs proved to be too much for local, residential-only insurers and prompted seven of them to become insolvent. For national insurers, the costs havetranslated to higher premiums or fewer policy offerings.
Florida’s hurricane risk has also played a role, as extreme weather has in many other states. Hurricane Ian in September 2022 posted the greatest insured loss after Hurricane Katrina according to CNBC.
Which companies have decreased Florida insurance coverage?
Three major companies have voluntarily withdrawn from the state since last year: Farmers Insurance, Bankers Insuranceand Lexington Insurance, a subsidiary of AIG.
AAA is not renewing a “very small percentage of higher exposure homeowner’s policies,” it told the Palm Beach Post. It has also released a statement saying that it is continuing towrite new policies in the state.
Friedlander said there are also 15 businesses that have stopped writing new policies but declined to name them.
Seven local insurance companies have become insolvent since February 2022.
How does it affect premiums?
Florida homeowners already pay more than the national average, and the premiums are only on the rise.
According to an analysis by the Insurance Information Institute, homeowners in Florida pay $6,000 a year on average for homeowners insurance, up 42% from last year. The average in the US is $1,700.
A depleted supply is partly responsible for driving up those costs, but not as much as litigation according to Friedlander.
How are homeowners responding to the insurance crisis?
The crisis is pushing more homeowners to “go bare” or decline purchasing homeowner’s insurance. In Florida, nearly 15% of homeowners do not have insurance, double the national rate. Friedlander attributed this to the crisis. This is only an option for those without a mortgage.
Florida homeowners are also opting to enroll in the state-backed, backstop insurer Citizens Property Insurance Corporation. Friedlander said that Citizens’ market share has doubled in the last 18 months as it averages 30,000 new subscribers each month.
Whilestate-operated insurers are common, he said that typically the rates are higher than private insurance tokeep them as a last-resort option. In Florida, Citizens’ premiums are lower than private insurers, which have skyrocketed past the limit that Citizens is legally allowed to charge. As a result, Citizens is taking on more risk than it can fund in the face of a major disaster.
Should Citizens experience a payout shortfall, all taxpayers in the state would be on the hook to bail it out with a multi-year hurricane surcharge on their tax bill.
“So it’s a bad situation,” said Friedlander. “We never want to be in that situation.”
In recent years, Floridians have seen the cost of homeowners insurance increase while the availability of coverage has decreased. This is due, in part, to the state's history of high levels of litigation and fraudulent roof replacement schemes.
Three primary factors are driving the insurance challenge. First, natural disasters are becoming more common and costly. Second, the price of reinsurance is skyrocketing. And finally, Florida's litigation-friendly environment compounds the issue by making it easy for customers to sue their insurers.
Earlier in July, Farmers Insurance announced that it is no longer offering new business or renewing any of its auto, home and umbrella policies in Florida. In mid-2022, Bankers Insurance Company reported its exit from Florida, only to be followed by AIG and Lexington Insurance, a subsidiary of AIG.
Some 11.9 percent of homeowners in the Sunshine State who told Redfin that they plan to move in the next year said they were doing so because of climbing insurance costs, roughly twice the number of U.S. homeowners who, on the national level, are planning the same (6.2 percent).
Gov. Ron DeSantis' office confirmed that State Farm Insurance plans to continue its presence in the Florida insurance marketplace after Farmers Insurance declared plans to leave the state.
Many property insurers went insolvent, left the state, or reduced their willingness to write new policies. Florida's Legislature and Governor took aggressive action to solve this problem, passing major property insurance legislation in 2021 and 2022, followed by major legal reforms and consumer protections last year.
Terms may apply to offers listed on this page. Florida homeowners insurance premiums have spiked in recent years. A combination of inflation, natural disasters, and lower competition is to blame. Homeowners can shop around with different insurers and consider raising their deductibles to save money on policy costs.
Flood Insurance Mandates (These changes became effective on May 13, 2024, the day Governor DeSantis signed the bill.) Citizens policyholders who must purchase flood insurance as a condition of eligibility for Citizens are no longer required to purchase flood coverage for personal contents.
Insuring a home in Florida is getting more challenging. Nationwide has joined a list of companies that are ending some homeowner insurance policies in the state.
Due to worsening climate and natural disaster-related risks and rising building costs, some of the nation's largest insurers, like State Farm, Allstate, and Progressive, are actively pulling out of Florida and California.
In simple terms, insurance companies are leaving Florida because it's best for their bottom line. When an insurance company is paying out more in claims than it's taking in, they run the risk of not being able to pay out any claims at all.
The average cost of homeowners insurance in Florida is $2,625 per year, or about $219 per month. That's 37% more than the national average of $1,915. In most U.S. states, including Florida, many insurers use your credit-based insurance score to help set rates.
Three primary factors are driving the insurance challenge. First, natural disasters are becoming more common and costly. Second, the price of reinsurance is skyrocketing. And finally, Florida's litigation-friendly environment compounds the issue by making it easy for customers to sue their insurers.
Flood Insurance Mandates (These changes became effective on May 13, 2024, the day Governor DeSantis signed the bill.) Citizens policyholders who must purchase flood insurance as a condition of eligibility for Citizens are no longer required to purchase flood coverage for personal contents.
In addition to wildfires, insurers have cited a range of reasons for dropping customers, including “density,” which refers to either the physical closeness of homes or an insurer's exposure to risk in a given area, and the risk of fires after earthquakes — a concern that harkens back to April 18, 1906.
If at any time: you fail to pay the premium by the due date. you obtained the policy through misrepresentation or fraud. anyone insured on the policy violated the terms or conditions of the policy.
However, it is important to note that Florida law does impose strict notice requirements on insurance companies. If an insurance company has decided not to renew a policy, then they have a legal duty to provide the policyholder with written notice, detailing the non-renewal, within 45 days of the coverage expiring.
Introduction: My name is Rueben Jacobs, I am a cooperative, beautiful, kind, comfortable, glamorous, open, magnificent person who loves writing and wants to share my knowledge and understanding with you.
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