Florida Consumers “Astonished” by Hikes in Property Insurance Rates
Florida real estate insurers are raising double-digit percentage rates, attributing the increases to lingering damage from past hurricanes, a wave of litigation and a law that encourages attorneys to sue by allowing courts to award them costs important.
Rate increases in Florida, the third-largest property insurance market among US states, are the highest in memory, according to some insurance agents and residents. One danger, they say, is that the new rates could make owning a Florida home unaffordable.
âI was flabbergasted,â said Karlos Horn, a 35-year-old law student who owns a four-bedroom single-family home in Hendry County, Florida. He said his premium doubled to $ 200 per month last August.
This equates to half of his mortgage payment of $ 400 and the biggest increase in his five years as a homeowner.
Florida’s property insurance market, which collected $ 56.6 billion in premiums in 2019, is unique and covers complex risks, including devastating hurricanes and the impact of climate change. Many insurers left the state after suffering heavy losses from Hurricanes Katrina and Wilma in 2005, leaving around 60 small and medium-sized businesses purchasing home insurance policies today.
Although there were no major weather events last year, some insurers are still grappling with claims from Hurricane Irma in 2017, said Logan McFaddin, an executive with the American Property Casualty Insurance Association. specializing in Florida.
They also face what McFaddin has described as âout of controlâ litigation in Florida, in part because of a law that may require insurers to pay âexcessive feesâ to attorneys in these cases. The practice has spurred a cottage industry of contractors and lawyers who sue insurers to replace an entire roof when only a few tiles are damaged, according to insurers.
Other less dramatic problems, such as pipe leaks, occur at an “unusually high” frequency in Florida, often causing severe damage, including mold, constantly eating away at profits, said Charles Williamson, CEO of Vault , a Florida-based insurance exchange. for high net worth individuals.
Insurers also pass the cost of large rate hikes on to consumers for their own coverage, known as reinsurance, which kicks in after insurers pay a set amount of claims.
Florida’s national property insurers reported an underwriting loss of more than $ 1 billion for the first three quarters of 2020 and nearly $ 500 million in negative net income, according to the Florida Office of Insurance Regulation.
“Insurance companies understand that their role in our market is to pay claims,” ââFlorida Insurance Commissioner David Altmaier told Reuters. “The challenge is that when these claims are so much more expensive than expected, it creates uncertainty, it creates turmoil – and it needs to be resolved.”
Florida insurers have requested 105 rate hikes in the first ten months of 2020, Altmaier said. More than half of the increases approved by regulators were greater than 10%.
Last month, Altmaier testified before Florida lawmakers, including his take on roofing litigation. âWe really need to spend time on thisâ¦ find ways to mitigate this kind of activity,â he said.
Lee Gorodetsky, an insurance agent in Fort Lauderdale, Florida, said he had no recollection of such a rate hike in his 34-year career. âThe last two years have been the worst we’ve seen,â he said.
As prices rise, more consumers are turning to Citizens Property Insurance Corp., Florida’s insurer of last resort, which supports high-risk clients who cannot get other insurance. or have to pay extremely high tariffs.
Citizens have issued 545,000 policies as of February 5, a 23% increase from a year ago, and he expects the number to reach around 700,000 by the end of the year, said a spokesperson. The growth signals a larger and unhealthy market by showing that typical blanket is not as widely available, industry experts have said.
Insurers are hoping the Florida state government will approve the bill that would reduce the high litigation costs they have seen in recent years. The bill, if passed, would build on other reforms passed in 2019.
The measures would include limiting the fees that insurers must pay to lawyers in claims litigation, shortening the deadlines for filing claims and capping payments for roof replacement.
However, the bill could also undermine the ability of homeowners to assert legitimate claims, lawyers said. This would unfairly favor insurers, a lawyer said.
âIt’s a great business model where insurers can collect premiums and not be sued when they don’t immediately pay someone everything owed,â Tampa attorney Chip Merlin said, which represents the insured. âYou don’t have to be a rocket scientist to understand that it’s good for the insurance industry.
(Reporting by Suzanne Barlyn in Washington Crossing, Pa. Editing by Lauren Tara LaCapra and Matthew Lewis)
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