Florida's insurance industry is in flux as
Idalia cleanup begins
Homeowners face uncertainty
amid the upheaval that has emerged in Florida’s insurance
industry in recent years. |
Article Courtesy of NBC News
By Gabe Gutierrez, Phil McCausland and
Melissa Chan
Published
September 2, 2023
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WATCH VIDEO |
CEDAR KEY — As cleanup begins in
the aftermath of Hurricane Idalia, the storm has served as a stark
reminder that Florida’s insurance industry remains in flux.
Idalia made landfall in Florida’s Big
Bend just before 8 a.m. Wednesday as a Category 3 hurricane.
It killed at least three people in Florida before it
battered Georgia and other states on the East Coast as a
downgraded tropical storm.
Idalia moved offshore Thursday morning, leaving around
330,000 customers without power in Florida, Georgia and
South Carolina.
Powerful storms have regularly pummeled Florida’s coastal
communities in recent years. The hurricanes have brought
high winds, lashing rains and deadly storm surge. Idalia
brought much of the same, and it has forced many homeowners
to turn to their insurance policies in hope that repairing
their homes and replacing their belongings might be covered.
But many of those homeowners face uncertainty amid the
upheaval that has emerged in Florida’s insurance industry in
recent years.
A thinning insurance market that is beset by more regular
hurricanes has caused insurance policy costs to skyrocket.
An average home premium in Florida is about $6,000 per year,
according to the Insurance Information Institute, an
industry trade organization. The U.S. average is about
$1,700.
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Burned rubble where a house stood after a power
transformer exploded in the community of Signal Cove in Hudson,
Fla., on Wednesday, after Hurricane Idalia made landfall.
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The state’s insurance industry is preparing to lose four insurers since
last year — Farmers Insurance, Bankers Insurance, Centauri Insurance and
Lexington Insurance. Farmers Insurance announced just last month that it
intends to leave Florida, affecting about 100,000 policy holders, and
that it would not be writing new policies.
Still, it appears Florida is better-positioned to handle insurance
claims than it was last year after the state’s insurers acquired
adequate levels of reinsurance — a reimbursement system that insulates
insurers from very high claims.
“With all the weather and hurricane
events that have come through, the reinsurance market has
hardened on the Florida insurance companies,” said Chris
Draghi, who specializes in the state’s insurance market as
an associate director at AM Best, a global credit agency.
“That’s led to material increases and reinsurance costs,
which, of course, then strain bottom line results to afford
the same level of protections as in the past.”
That could mean that, as the costs for insurers rise
further, Floridians’ premiums will be affected.
Gregory Buck, the president and owner of National Risk
Experts Insurance, based in Florida, said that his company’s
premiums last year were four times the national average but
that those prices are largely based on reinsurers. He
expects rates to increase further.
“If you look at year on year for the last three to five
years, you’re probably talking about between 100 and 300%
(in insurance cost increases) depending on where you are and
obviously the age and the construction of the homes
themselves” Buck said by email. “But absolutely, we are
looking at more increases.”
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The remains of a destroyed home built atop a platform
on piles in Keaton Beach, Fla., on Wednesday during a flight
provided by mediccorps.org after Hurricane Idalia passed through.
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Homeowners in the state said they expect the cost to
jump once again, which has led some to consider going without insurance
because of the price.
Aimee Firestine stood outside her hotel, the Faraway Inn, in Cedar Key
as she said her homeowners insurance rate doubled last year. She said it
has left her “thinking about whether you can keep paying for that.”
“That’s one of the issues in Florida is Mother Nature does what it wants
and we have to just rebuild and hope insurance can help us out with it,”
Firestine said.
The cost of insurance policies could be a major contributing reason that
as many as 15% of Florida homeowners are living without property
insurance. That is the highest percentage in the country, according to
the Insurance Information Institute.
In Florida, 16 severe storms or hurricanes since 2020 have caused $100
billion to $200 billion in damage. That has pushed many in the state to
turn to Citizens Property Insurance Corp., the state-backed insurer of
last resort, which has quickly become Florida’s fastest-growing insurer.
The company now has more than 1.4 million policies, centered largely in
southeast Florida, up precipitously from 500,000 in 2019. It now covers
roughly 1 in 8 Florida households.
It is a reflection of how private insurers have left the state as the
storms walloping Florida grow in number and strength, said Amy Bach, the
executive director of United Policyholders, a nonprofit consumer
advocacy group. Because the agency is a state-run entity, it could also
have an effect on taxpayer dollars.
“As they retreat and government is having an increasing role, that
basically translates into taxpayers,” Bach said. “So really, we’re
talking about a huge shift in risk-bearing from the private sector to
the public, and it’s a big deal.”
Four new insurance companies will join the Florida market next year
after legislative reforms designed to promote market stability were
passed and signed into law, which could help address the problem. It is
unclear, however, what market share the companies might be able to soak
up or what their rates might be.
Aggravating the problem, 82% of Floridians do not have flood insurance,
which is typically operated by the National Flood Insurance Program, a
federal program run by the Federal Emergency Management Agency. Congress
created the program in 1968 because of a similar issue — the lack of
private insurers in flood-prone areas.
Analysts and experts said few people purchase flood insurance because
many do not realize that most homeowners or hurricane policies do not
cover flooding, even though hurricanes are a key threat to Florida’s
low-lying areas.
Hundreds of thousands of Florida homes lie in flood-risk areas that are
not designated as such by the federal government, leaving many
homeowners vulnerable to massive out-of-pocket costs for damage after
hurricanes.
More than 785,000 properties in the state face flood hazards but are not
recognized as high risks in FEMA’s flood maps, according to data from
the First Street Foundation, a nonprofit research group.
The First Street Foundation said that it factors in heavy rainfall, the
impact of small waterways’ flooding and climate change and that it
updates its models annually, while FEMA does not. On its website, FEMA
said it “consistently releases new flood maps and data, giving
communities across America access to helpful, authoritative data that
they can use to make decisions about flood risk.”
Meanwhile, Mark Friedlander, a spokesman for the Insurance Information
Institute, said Florida has major flood events year-round.
“We’re going to see very significant flood losses from the hurricane
this week, and only a small percentage of homeowners have that
coverage,” he said.
In Taylor County, where Idalia made landfall, for example, only 5.4% of
homeowners have flood insurance, Friedlander said. The county, in the
Big Bend area of Florida, is home to about 21,000 people, according to
the latest census data.
“That entire community is under water,” Friedlander said.
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