As hurricane season approaches, three insurers
are canceling thousands of Florida customers
Article Courtesy of The Sun Sentinel
By Ron Hurtibise
May 20, 2021
As another hurricane season bears down on the state,
more than 50,000 Florida home insurance customers will soon receive
notices that their policies have been canceled or won’t be renewed.
State insurance regulators recently authorized “extraordinary”
terminations of thousands of policies of Florida-based insurers
Universal Insurance of North America, Gulfstream Property & Casualty,
and Southern Fidelity.
And the bloodletting will likely continue
over the coming months with other insurers seeking to shed
risky or unprofitable policies while refusing to insure
older homes with roofs, electrical systems and plumbing that
have not been upgraded to comply with current building
codes, said Paul Handerhan, president of the
consumer-focused Federal Association for Insurance Reform.
“For the average consumer, the outlook is not bright,” he
said. “There will be less options at higher price points.”
The consent orders by the state Office of Insurance
Regulation authorizing the early cancellations did not
specify locations of affected policyholders, and officials
of the companies did not respond to requests for
information. But if recent history is any guide, affected
consumers are likely disproportionately located in Broward,
Miami-Dade and Palm Beach counties, as well as in the
Orlando metro area.
Insurers have been reducing their exposure in the three
South Florida counties for several years, saying they are
the source of inflated damage claims, excessive litigation
and outright fraud. The trend recently has spread to Orange,
Seminole, Osceola and Lake counties in Central Florida,
As insurers continue to bemoan heavy claims losses
and litigation costs in South and Central Florida, state insurance
regulators are allowing three companies to cancel or not renew
thousands of policies, forcing those jilted customers to find new
coverage weeks before hurricane season begins.
The consent orders, signed by Insurance Commissioner David Altmaier,
said approval of the cancellations and nonrenewals “is an extraordinary
statutory remedy reserved to address insurers which [otherwise] are or
may be in hazardous financial condition.”
Many, though not all, Florida-based insurers have
been reporting operating losses over the past five years as a result of
rising claims costs, more frequent severe weather events, increased
lawsuits and higher costs of reinsurance — insurance that insurers buy
to guarantee they can pay all claims after a catastrophe.
Here are details of what Altmaier authorized in the consent orders:
Gulfstream Property and Casualty — The
Sarasota-based company, which reported a net loss of $22.6 million
in 2020, may cancel 20,311 policies before their terms expire with
45 days’ notice. They include 932 condominium owner policies and 47
tenant policies. Refunds for the balance of those policies’ terms
must be sent to policyholders by June 1.
Universal Insurance Company of North America —
Also based in Sarasota, the company may cancel 13,294 policies with
45 days’ notice. Not to be confused with Universal Property &
Casualty, the state’s largest property insurer, the company also
reported a $22.6 million net loss in 2020. The company agreed to
administrative supervision by the state if its pending merger with
Texas-based Universal North America Insurance Company is not
approved by Texas insurance regulators.
Southern Fidelity Insurance Company — Based in
Tallahassee, the company was approved to drop 19,600 residential
policies over the next 14 months. About 2,300 insurance customers
will be sent notices of nonrenewal with less than the required 120
days’ advance notice. Last year, state regulators authorized
cancellation of 23,800 policies following Southern Fidelity’s merger
with Capitol Preferred.
Homeowners who get a notice of cancellation or
nonrenewal should move quickly to secure coverage with another company,
the Office of Insurance Regulation says on its website. Terms of the
consent orders require the companies to work with affected customers and
their insurance agents to help them find new carriers.
Many, if not most, of those customers will end up with little choice but
to buy a policy from state-owned Citizens Property Insurance Corp., the
so-called “insurer of last resort.” Citizens policies are considered
inferior to private-market policies because the company limits personal
liability coverage and subjects its customers to surcharges if Citizens
can’t pay all claims after a catastrophe.
Citizens has been rapidly growing as private-market insurers cancel and
decline to renew Florida policies. That growth is worrying legislators
who know that an inability by a swollen Citizens to pay all claims after
a major storm will trigger not just surcharges for Citizens customers
but surcharges for all property insurance customers in Florida.
Citizens, which expands and contracts as market conditions warrant, is
growing by about 5,000 policies a week and could reach 700,000 by the
end of the year. In 2018, it had fallen to 452,000 policies.
Handerhan said policyholders who receive notices of cancellation or
nonrenewal should contact numerous agents if necessary to find out if
another company will insure them at an affordable price. They should
settle for Citizens only if they cannot find a viable alternative, he
Citizens spokesman Michael Peltier said he doesn’t know how many of the
canceled policies will end up at Citizens. But the company is ready for
them, he said.
“We are in a good position to handle any policies that come our way,” he
said by email. “We have been in ramp-up mode for some time as we respond
to market conditions over the past year.”
Ultimately, owners of older homes in Florida will have some serious and
expensive decisions to make if they want to avoid going with Citizens,
Handerhan said. More and more companies are deciding it’s too expensive
to insure homes that don’t conform to current building codes, he said.