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Florida homeowner insurance crisis could worsen as more companies downgraded

Thousands of homeowners dropped by carrier since January
Posted at 5:51 AM, Jul 26, 2022
and last updated 2022-07-26 11:18:32-04

WEST PALM BEACH, Fla. — Since the Florida state legislative session in May, little has changed in homeowners insurance premiums lowering.

Since January, up to 400,000 homeowners in Florida have been dropped by their insurance carrier or have received non-renewal letters.

Also, 275,000 homeowners had to find a new insurance carrier because their companies went insolvent, unable to pay their debts.

This week, the Insurance Information Institute revealed 27 more companies will have their rating lowered by Demotech, the organization that rates insurance companies.

SPECIAL COVERAGE: Protecting Paradise

This could reveal more companies on the brink of insolvency, adding to what's being described as a homeowners insurance crisis in Florida.

Helen Kruger, Stuart resident discusses increase in home insurance costs
Helen Kruger of Stuart, Florida, said she was "floored" by the increase in her home insurance costs this year, even calling her provider to see if it was a mistake.

The Insurance Information Institute reports Florida homeowners are paying nearly three times the national average for yearly property insurance premiums.

The institute said Florida homeowners are paying an average of $4,321 a year when the national average for yearly property insurance premium is $1,544.

The reasons include rampant roofing fraud, runaway litigation and rising home repair costs, according to the Insurance Information Institute.

Citizens Insurance, the state-backed insurer, is nearing the one million client mark. It was half of that two years ago.

Mark Friedlander with the Insurance Information Institute said the current model can't be sustained.

"It's deteriorating literally by the day. Citizens' growth is completely out of control. An insurer of last resort, a state-run insurer of last resort should never be the primary option for homeowners. It should strictly mean last resort, last chance opportunity to get coverage. Not first and only opportunity to get coverage," Friedlander said.

RELATED: 17 Florida homeowners insurance companies may face downgrades

Insurance companies writing policies in Florida took on more than $1 billion in underwriting losses last year.

The Insurance Information Institute said a fraudulent roofing replacement problem replicating itself thousands of times over is fueling the problem.

In this process, contractors approach homeowners with an offer to replace their entire roof by first signing an assignment of benefits letter.

This gives the contractor all the rights to negotiate with the insurer, leaving the homeowner out of the process.

Those contractors then inflate the replacement cost of the roof by tens of thousands of dollars.

Insurance companies try to challenge it in court, spending thousands on attorney and court fees.

That's happened so much that insurance companies started passing the cost down to homeowners in higher yearly premiums.

It led to insurance companies dropping clients with what were considered aging roofs, some with years of life and durability left.

That's one thing the state Legislature potentially solved in the May special session.

Now, homeowners can get a roof inspection if the inspector can prove there are at least five years of use left; an insurance company can't drop you solely for your roof age.

Insurance agent Lee Wiglesworth, who serves Palm Beach County and the Treasure Coast, is seeing some insurers accepting those letters to successfully appeal non-renewal letters.

However, Wiglesworth said insurers are now looking at the age of the entire house as a potential reason to not accept new clients.

That could spell trouble for thousands of local clients who have previously been dropped this year and are searching for new coverage in hurricane season.

"Now that they're not able to do that roof, we're seeing age of construction, sometimes," Wiglesworth said. "I just asked the staff what options we have for full water, full hurricane in Palm Beach County based off age of construction and they said 2010 or newer."

For those that weren't dropped by their insurance company, budgeting around a big premium jump has been challenging.

Helen Kruger of Stuart is on a fixed income. Her yearly premium increased by nearly $1,800.

"Well, I was floored. I called the insurance company and asked them if could it be a mistake because I had no claims. I have Category 5 hurricane shutters on the house all the way around, permanently. They're not going anywhere," Kruger said.

The state special legislative session led to the opening of the My Safe Florida Home Program.

If eligible, free home inspections can identify some upgrades to your home. Eligible homeowners could also qualify for a grant to make wind mitigation upgrades.

To potentially save on your yearly premium, homeowners should also review their declarations page and specifically their dwelling total replacement cost.

Lowering that cost could lead to hundreds less on a yearly premium.

Also, the upfront cost of installing impact windows and garage doors will likely lead to years of savings.