Many Floridians are having a harder time getting homeowners’ insurance. Not only have premiums been rising faster than before, but simply finding the right insurance for your needs—or a carrier that will work with you—is becoming more difficult across the state. While we delight in our warm weather and sunny beaches, the shape of the insurance industry in Florida has gone from bad to worse. To avoid a collapse of the market and to ensure greater stability in the coming years, drastic cost-savings measures are being approved.
This didn’t happen overnight: Florida has faced a tightening property insurance market for years. The cause has mostly been a consequence of rising costs associated with properties, repairs, reinsurance, litigation events, dishonest contracting, and even misuse of claims. Additionally, we can’t forget that the damage from hurricanes Irma and Michael (2017-2018), along with the lingering “loss creep” of claims payouts afterwards, has been a major driver towards hardening the Florida insurance market in recent years.
Fast forward to 2021 and carriers all across the state are still scrambling to manage their risk exposure. In the process, the majority of insurers have applied rate increases (many of which filed for at least a 10% increase), have closed for new business either state-wide or in specific counties, and have made some significant policy changes. The most notable of those policy changes, which have been adopted by some—but not all—insurers, include applying a minimum “roof age” for policyholders’ homes, making adjustments to their “water damage” limitations, and changing the minimum “year of construction” for an insured property.
What does all this mean for Florida residents? Besides the ever-rising premiums, it means that over 50,000 Florida policyholders will soon be looking for a new carrier after several large insurance companies in the state were approved to drop the policies. Three of the biggest include: Universal Insurance Company of North America (UICNA), Southern Fidelity Insurance, and Gulfstream Property & Casualty Co.
According to The Florida Office of Insurance Regulation (OIR), the cancellation and nonrenewal of policies is considered an extraordinary statutory remedy to avoid severe financial consequences and is meant to ensure that the largest Florida-based insurers remain solvent after having collectively lost billions of dollars last year. Without such changes, these companies would be unable to fulfill the surplus requirements under Florida law. Dropping these policies will thus lower the exposure these insurers have to skyrocketing reinsurance costs and to the highest-risk geographic areas. The OIR believes this response to be the best course of action to protect the interests of the public and to avoid a total collapse of the insurance industry in Florida.
The downstream effects, however, will be felt by many Florida consumers. Even if you haven’t had your policy dropped, you will almost certainly experience further rises in premium costs while simultaneously having fewer options and less comprehensive coverage. Until state-level legislation breathes life back into the Florida insurance industry by tackling systemic problems related to litigation, reinsurance, and claims handling, the OIR recommends that policyholders affected by cancellations contact their agent to obtain replacement coverage.
To discuss how these insurance changes affect you, call us at The Marcus Group.