Florida's home insurance is the highest in the country at an average of $6,000 per year, versus the US average of $1,700
National insurers have minimal presence in Florida, with big insurance companies dominating over half the market nationwide, but in Florida, State Farm holds about 7% of the market, according to the Insurance Information Institute. No other major insurer has even 2%.
Regional and local insurers, left to provide coverage, are struggling. More than half of insurers based in Florida are on the state insurance regulator’s watch list due to financial instability. Six were forced to liquidate last year, and another one earlier this year. To stay solvent, remaining insurers are charging rates nearly four times the national average. Homeowners in Florida pay about $6,000 a year to private insurers, compared to a national average of $1,700.
The insurance industry claims that Florida’s hurricane risk is only part of the problem, blaming a legal system that allegedly promotes litigation abuse and excess claims.
“This is a man-made crisis,” said Mark Friedlander, spokesperson for the Insurance Information Institute. The industry has pushed for and won several reforms to curb perceived abuses, but these changes haven’t improved the situation for insurers, partly due to a flood of nearly 300,000 lawsuits filed just before the law took effect.
“That will muddy the marketplace for years to come,” said Friedlander. “That volume of lawsuits will drive more regional companies out of business. The laws have changed, but market conditions have not. It’s still a mess.”
Florida’s location and low elevation make it particularly susceptible to hurricane damage. The Atlantic hurricane season is projected to be about normal this year, with a 30% chance of an above-normal season and a 30% chance of fewer hurricanes than normal, according to the National Oceanic and Atmospheric Administration.
Last year, Hurricane Ian caused $114 billion in inflation-adjusted damage, making it the most expensive storm to hit Florida and the third most expensive in U.S. history. However, Florida experienced no hurricanes from 2019 through 2021.
Much of the hurricane damage comes from flooding, which is covered by the National Flood Insurance Program, a federal agency. Wind damage to homes and roofs is covered under homeowners’ insurance policies.
Trial lawyers dispute that frivolous or fraudulent lawsuits are the root cause, instead blaming the lack of proper regulation on the insurance industry by the state.
“We’ve seen reform after reform. Insurance companies have been allowed to plunder profits from the state through excessive payouts to executives and sister companies while shortchanging policyholders,” said Stephen Cain, president-elect of the trade group representing Florida trial lawyers. “The homeowner’s insurance crisis is a regulatory failure. Proper regulation during the good years, when there were no hurricanes, would have prevented undercapitalized companies from exploiting Florida homeowners.”
Even Friedlander acknowledged that the new limits on lawsuits might leave some homeowners unable to collect on legitimate claims. But he attributed this potential issue to the abuse that has occurred over many years.
The state provides an alternative through the Citizens Property Insurance Corp., established in 2002 as an insurer of last resort for those unable to find coverage in the private market.
To qualify for Citizens insurance, the lowest quote from a private insurer must be more than 20% higher than the Citizens quote. Citizens’ average policy is about $3,700, but this is a statewide average. In high-risk areas like South Florida's Atlantic coast, countywide averages for a Citizens policy range from $5,100 to $6,800. In these counties, Citizens holds a significant market share: about 42% in Miami-Dade, 30% in Broward, and 36% in Monroe County, which includes the Florida Keys.
With affordable private insurance becoming harder to find, more Florida homeowners are turning to Citizens, which now has 1.3 million policies, about 16% of the market, and is growing by about 3,000 policies a month. The number of policies has increased nearly 50% from this time last year, posing a significant risk to the market.
The board of Citizens admits that its premiums are insufficient to cover the risk it has assumed. If one or more major hurricanes hit South Florida's Atlantic Coast, Citizens' reserves could be quickly depleted, forcing it to impose emergency assessments on policyholders and other insurance customers statewide. This could mean an additional 45% for current Citizens policyholders. Even those without Citizens policies could face a 2% assessment on all their insurance premiums, both home and car, if the financial setback is severe enough.
Even without these assessments, Citizens is requesting a 14% rate increase to take effect later this year, which will be considered by Florida’s insurance regulator next week. Other insurers are also seeking steep increases.
One major reason is that reinsurance companies, which insurance firms rely on to cover some of their risks, are hiking their premiums by 30% to 40%, according to Matthew Carletti, an insurance industry analyst for JMP Securities.
“If you are a reinsurer, you have lost money for the last five years,” said Carletti. “They’ve had enough.”