Home insurance rates skyrocket
Jason Battle was expecting his insurance rate to go up after a tree branch fell through the roof of his Belle Isle home in September, forcing him to file a claim to replace it.
But what happened next surprised him. His premium from Fort Lauderdale-based Universal
Property & Casualty soared from $2,429 to $4,010, a 65% increase.
“There was no explanation,” said Battle, an orthodontist. “Just, ‘Here’s your new premium.’’’
Homeowners are paying much more for property insurance around the state, sometimes in ways they didn’t know were possible and far exceeding the 15% annual increase cap that insurance companies can impose without asking state regulators for a public hearing.
With two major insurers being declared insolvent and others fleeing the state, Florida carriers are charging every dollar they can as they and homeowners struggle through what lawmakers have declared a crisis in the market.
“This is the perfect storm of problem for Florida homeowners,” said state Sen. Jeff Brandes, R-St. Petersburg. “You have hardening market, increasing material costs, increasing labor costs, insurance companies that are dealing with 100,000 lawsuits in a year, and a malaise in the Legislature that just makes no progress.”
For Battle, part of the price came from a reevaluation of the replacement costs for his home, which is the total amount to replace the entire structure. Battle’s dwelling coverage rose to $296,159, a 17% increase over the previous year.
Pandemic-related delays and labor shortages have driven up construction costs to unseen levels. Prices for most materials, includ
ing lumber, are up close to 30% over last year, according to Dodge Data & Analytics.
“The good news is that factory output in the United States is almost back to where it was before the pandemic,” said Richard Branch, chief economist at Dodge. “That provides some hope that we could see price inflation ease in the second half of the year,” though he cautioned the war in Ukraine might create inflationary pressure.
Florida’s Office of Insurance Regulation confirmed there is no cap on how much a carrier can increase replacement cost estimates.
Mark Friedlander, Florida-based spokesman for the Insurance Information Institute, says having an accurate replacement cost, even though it raises the premium, saves customers in the unlikely event of a total loss.
“If you lose your house to a fire or hurricane, you’re only going to get what’s in your policy,” he said. “It’s a benefit to homeowners to make sure they have the correct insurance policy.”
Insurance companies in Florida’s regulated market are allowed to raise premiums by up to 15% each year. If they want more, they have to ask the state for permission to do so at a hearing.
But filing for a rate increase isn’t the only way insurance companies can raise rates, leading to increases such as Battle’s 65% and even more.
Universal Property filed a 14.9% increase for the state, avoiding a hearing, plus a 3.9% increase for reinsurance, something companies buy to protect themselves from catastrophic losses in a disaster such as a hurricane.
Universal spokesman Travis Miller says those rates are an average and can be different for individual policies. Miller would not comment specifically on Battle’s situation.
Florida already has highest premiums in the nation, according to the Insurance Information Institute. At an average of $3,600 annually, they are more than double the U.S. average of $1,398.
Last year, prices in the state increased by an average of 25%, compared with a 4% rise nationally. Experts say that’s just the beginning.
“We’re projecting a 30-40% average increase this year,” Friedlander said.
Insurance companies claim extraordinary measures are necessary to save the industry in Florida. The fear of devastating hurricanes is driving up the price of reinsurance. Insurance companies are allowed to pass on that cost to the consumer.
Insurers have also been sounding alarms about a rise in roof claims litigation. In a letter to the Legislature last year, David Altmaier, commissioner for the Office of Insurance Regulation, claimed that 75% of insurance lawsuits in the U.S. originated in Florida.
In response, thousands of homeowners have had their policies dropped over the age of their roofs. In some cases, companies have required policyholders to replace their old roofs and then, instead of offering a discount, they increase the home’s replacement cost, sending the premium even higher.
Some insurers, such as United Property & Casualty, have stopped writing new home policies in the state. Others are shutting down. Orlando-based St. Johns Insurance, one of the largest carriers in the state, was declared insolvent in February, followed shortly by Avatar Insurance.
Already this year, Southern Fidelity, another of the state’s largest carriers, asked insurance regulators for an 111% increase. Last year, Southern Fidelity was approved to cancel 19,600 policies.
On Friday, Miami Beach Mayor Dan Gelber wrote a letter to Gov. Ron DeSantis asking for a special session of the Legislature to deal with the insurance crisis. Brandes and other lawmakers have also been pushing for that, too, after there was
no movement on insurance during the regular session that ended March 14.
DeSantis said Monday he would welcome a special session on the issue if lawmakers can reach an agreement on what to do.
In the meantime, Friedlander says if the premium
seems unusually high, customers should shop around. “Kind of like when you get a diagnosis at the doctor, you should get a second opinion,” he said.
Some companies might calculate a lower replacement value. Homeowners also can buy a policy that
doesn’t cover replacing the entire house or agree to higher deductibles to lower the rate.
Battle, however, says he can’t do that because the damage to his house isn’t fixed yet. “It’s in the middle of construction,” he said. “I have to pay it. No one else will cover me now.”
In fact, Universal sent him a letter saying they would be dropping him next month because the construction was taking too long, he said.
Brandes says shopping around isn’t really feasible for many homeowners in this climate.
“What we’re hearing right now is, if you get an offer, you should take it,” he said. “We can’t be sure you’ll get another offer.”