Insurance crisis leaves Florida’s homeowners in increasing jeopardy

The rising cost of homeowners insurance is the biggest risk to the South Florida housing market.

As more and more home insurers go bust or drop out of the Florida market, Sunshine State homeowners are paying the price both literally and figuratively. They now have fewer choices and face higher premiums. And it’s getting worse every year.

Over the past six months, some of the best-known insurers said they won’t renew thousands of existing homeowner policies or write new ones. Other companies dropped out for financial reasons, either because Florida’s storm risk made their business less profitable or because they faced insolvency due to industry regulations.

Lost coverage has left thousands of policy holders scrambling for affordable coverage or any coverage at all. Many have had to turn to the state-backed Citizens Property Insurance Corp., the insurer of last-resort.

To illustrate the numbers, United Property and Casualty Insurance Co., which was among the top 10 homeowners’ insurers in Florida, dropped 180,000 policyholders; St. John’s Insurance left 160,000 Florida customers scrambling for coverage; Avatar Property & Casualty Insurance Company gave its 37,000 customers until April 15 to find new coverage; Lighthouse Insurance left 13,000 policy holders in the lurch; and Lexington dropped 8,000 customers. Companies left in business are charging more for policies to offset their risk. Specific neighborhoods in South Florida will see costs of 100-125% above the national average and will have mandatory flood insurance requirements if securing a mortgage.

Florida’s property insurance market is in crisis as companies try to reduce overall exposure due to catastrophic loss as well as rampant fraud and frivolous litigation.

Many point to fraud and litigation as being the biggest problem for insurance companies. In fact, 75% of home insurance claim lawsuits nationwide were filed in Florida. They specifically point to century-old legislation (FL Statute 627.428) that require the insurance company to pay for all legal fees in the case if it ends up paying out more than the original claim. Roofers and attorneys know this, so when they attempt to replace a roof because of a few broken tiles and the insurer denies the claim, they will sue. The attorneys know they are going to get their plaintiff costs anyway.

Insurance industry advocates have looked to the Florida Legislature for help. Three property insurance bills designed to ease skyrocketing premiums failed to pass during the recent legislative session. One bill would have allowed insurers to pay roof claims based on actual cash value vs. full replacement value. The other bills targeted the crushing demand for Citizen Property Insurance Corporation claims. And while a special legislative session will take place this month, the insurance crisis isn’t likely to be addressed.

When all is said and done, as insurers fight to stay in business, the rising costs of claims and litigation fall right into the laps of consumers. Homeowners pay soaring premiums, because they don’t have a choice.

Demotech, which evaluates the financial stability of insurers, said it well in its March 23 letter to Gov. Ron DeSantis: “The conditions of the property insurance marketplace in Florida are unsustainable, and without the necessary corrective action, many Florida insurers will struggle to maintain adequate surplus, efficient capital sources will avoid the market, private reinsurance costs will become prohibitively expensive, and consumers will ultimately bear the cost.”

On homesteaded property with fixed rate mortgages, property insurance is the only item that can drastically change a homeowner’s monthly mortgage payment. As insurance companies continue to go under or stop doing business here, the situation will only get worse.

Homeowners will continue to face exorbitant premiums, increases to annual premiums or even be priced out of their own homes. For most property owners, their home is the single largest asset they own. To help fix the insurance industry in South Florida, legislators need to focus more attention on how this will continue to negatively impact the homeowner and how they can better protect their constituents.

Whitney Dutton, owner of The Dutton Group@Re/Max First, a full-service residential real estate group, is the No. 1 Realtor in Fort Lauderdale, based on total transactions closed. For more information, call 954-440-2333 or email Sales@Whitn eyDutton.com.

By Whitney Dutton