What is Happening to Home Insurance Rates in Florida?

 

What is Happening to Home Insurance Rates in Florida?

Let’s address the elephant in the room: home insurance rates in Florida are increasing without an end in sight. You might be wondering why you’re paying more to insure your home even if you’ve never filed a claim. The answer might surprise you. Sure, Florida experiences major weather events from hurricanes to hail storms and tornadoes. However, these natural disasters are not the main reason the home insurance market is struggling. The cause lies within the ongoing battle against Assignment of Benefits. 

What is Assignment of Benefits?

Assignment of Benefits (AOB) is a contract that transfers a policyholder’s right to a claim over to a third party person, such as a contractor. Property owners often sign this innocently without fully understanding what they are agreeing to. Once an AOB is signed the third-party can request payment from an insurer on behalf of the policyholder and even file a lawsuit against the carrier. This has led to inflated claim payouts and legal fees for the insurance companies. In total, property insurers in Florida lost approximately $1.5 billion in 2020 alone. 

One-Way Legal Fees

In 2019 approximately 75% of all lawsuits filed in the U.S. against property insurance companies were made in Florida. However it was also reported that only 8% of all home insurance claims made that year were for Florida properties. The reason for this? Florida’s unique one-way attorney fee statute. Until 2019, an individual suing an insurer could recover their legal fees if they won their case, however insurers were responsible for payment whether they won or lost. The law has since changed and now the one-way statute only applies to litigation directly between a policyholder and their insurance company and not to AOB lawsuits, which involve a third-party. 

New Assignment of Benefits Laws

Legislation was passed in 2019 in an attempt to limit AOB claims. The new guidelines require contractors to present an itemized invoice to the insured and insurance company ahead of performing repairs. This allows insurers to monitor the claim progress more closely. Another important provision allows for insurers to include writing in their policies that prohibit AOB claims. In addition, policyholders now can void their AOB contract within 14 days of signing.

The Damage is Done

Thinning of the Market

The combination of inflated claims, severe weather events, and litigation fees proved too much for many to handle and, over the past few years, we have witnessed multiple property insurers in Florida close their doors. The remaining carriers in the state have been forced to increase premiums and limit their exposure within the most lawsuit-prone areas of the state in order to stay afloat, effectively thinning the insurance options available to homeowners. During the first quarter of this year the insurance regulation office approved nearly 100 rate increase requests - more than half of those were for at least a 10% increase. 

Limiting Exposure Risks

In addition to increasing premiums, property insurers in Florida have tightened their underwriting guidelines which makes it more difficult for older homes or homes without certain updates to find coverage. In the past homes were not considered “old” by insurance standards until 40+ years of age; this is when carriers would begin to require 4-point inspections and would limit certain coverages such as water damage. However, more and more carriers are no longer accepting older homes and have updated their age restrictions for roofs, plumbing, and air conditioning units, requiring these updates to be more recent. Another way carriers are reducing their exposure is by no longer accepting risks in certain counties and zip codes throughout Florida. 

Citizens Insurance

Citizens Insurance is a not-for-profit property insurer created by Florida’s government to be available for risks that do not qualify for coverage with other carriers. Commonly known throughout the industry as the insurer of “last resort”, the state-backed Citizens has become the only option for many property owners with all of the changes happening within the market. Citizens has grown in size over the last two years, taking on more than 15,000 new policies in March of this year alone. This rapid growth has even the government-led carrier requesting rate increases. Most recently Citizens requested more than a 7% average increase, but was only approved for 5%. 

What Can You Do? 

If you have recently made any updates to your home such as a new roof, storm shutters, or a security system you may be eligible for a discount on your home insurance policy. We also work with several carriers who offer bundle discounts for having multiple policies with a certain carrier. Contact our office if you have any concerns about your existing coverage or premium. Our team proactively reviews upcoming renewals for rate changes and shops your rate with our other top-rated carriers, assuring that you receive the best value and coverage for your home.