Insurance costs threaten Florida real estate boom
MIAMI – The Florida property insurance market is struggling as rising carrier losses and rising premiums threaten the state’s booming real estate market, insurance officials and analysts say. sector.
Longtime homeowners are facing double-digit rate hikes or notices that their policies won’t renew. Out-of-state homebuyers who flocked to Florida during the pandemic are getting sticker shock. Insurers swimming in red ink are cutting coverage in certain geographies to shore up their finances.
Various factors are at play, according to insurance executives and analysts. Two hurricanes that hit the state – Irma in 2017 and Michael in 2018 – generated claims with an estimated cost of around $ 30 billion. The cost of reinsurance, which insurers purchase to cover some of the risks associated with the policies they sell, is increasing. Of particular concern are excessive litigation over insurance claims and the proliferation of what insurers see as bogus roof-related claims, executives said.
A large group of Florida owner insurers followed by Marsh McLennanof
Guy Carpenter’s business recorded technical losses of $ 1.58 billion in 2020, more than double the loss of $ 664 million in 2019.
“The industry is panicking because it is losing so much,” said Barry Gilway, managing director of Citizens Property Insurance Corp., a state-backed insurer of last resort that is growing rapidly as private sector insurers withdraw. Unless there are changes, he said, “rates will continue to skyrocket and that will absolutely have an impact on the real estate market.”
Eric Firestone, a 37-year-old teacher who lives with his wife in the Miami area, received a letter from their insurance company in February saying their policy would not be renewed because the carrier no longer served their area. When their insurance agent shopped for an alternative, the cheapest one they could find had an annual premium of $ 9,644 – an 85% increase from their most recent premium of $ 5,205.
“Where am I going to get the extra $ 4,000?” Mr. Firestone said. “In the worst case, I’ll have to go into debt on a credit card.”
“The industry is panicking because it is losing so much.”
Florida is the most expensive state in the United States for home insurance. Residents are expected to pay an average of $ 2,380 in premiums this year, a 21% increase from the $ 1,960 paid in 2018, according to estimates from the Insurance Information Institute professional group. In contrast, the average American homeowner is expected to pay $ 1,297 this year, up 4% from $ 1,249 in 2018.
Of 105 rate increases for property and casualty policies approved by the Florida Office of Insurance Regulation last year, more than half exceeded 10%, up from six of 64 in 2016, lawmakers told Insurance Commissioner David Altmaier.
Ana Regina Myrrha, an insurance agent in the Orlando area, said she hired three more employees because customer policies that automatically renew now require a “re-quote” or finding less alternatives. dear. Her office used to tell customers to expect a single-digit rate hike on renewal, she said, but “we are now telling them that a 20% hike is a giveaway. “
Florida lawmakers are considering bills that their supporters say will help curb premium increases. Among the provisions of a Senate measure backed by the insurance industry and passed by the Republican-led chamber are limits on attorney fees and roof coverage that supporters say would reduce costs. inducements to prosecutions and frivolous claims.
A GOP-led House measure that industry representatives see as weaker is expected to be voted on in the coming days. If it passes, lawmakers will have until the end of the session on April 30 to negotiate a compromise.
Many Democrats and plaintiff lawyers oppose the bills, saying they would hurt consumers by limiting legal remedies against insurance companies. Opponents say the insurance industry exaggerates the role of fraud in damaging its finances and downplays losses from natural disasters and rising reinsurance rates.
While Florida accounted for 8% of all home insurance claims in the United States in 2019, it accounted for 76% of home insurance lawsuits, according to an analysis by Mr. Altmaier’s office.
A survey by his office of Florida insurers representing about 60% of the market showed that they received 90,950 roofing claims in 2020, up from 56,657 in 2019, due instead to normal wear and tear, which is not assured, according to industry executives.
In Florida, as in other states, policyholders with disputed claims can sue their insurers. Critics say Florida law currently allows too easy access to legal fees paid by insurers, encouraging contractors to attract business and lawyers to sue frivolously for claims, soliciting legal fees.
“Let me help you get a new home with insurance!” reads a door hanger Mr. Altmaier shared with lawmakers.
Mandy Wells, 40, a real estate agent in Cape Coral, met with a representative for roofing company Marlin Construction in 2019 about damage from the storm. The rep guided her through filing a claim and said she would get a new roof, according to Ms Wells. She signed an agreement authorizing Marlin to receive payment directly from the insurer.
But Ms Wells said Marlin, who has generated numerous complaints with the Better Business Bureau, never performed any work and broke contact when she refused to sign additional documents. Scott Hertz, an attorney for Marlin, said Ms Wells cut Marlin off after receiving an insurance payment, and the parties are now locked in litigation, in part for that money. He said the complaints against Marlin relate mainly to the employee who met Ms Wells, who is no longer with the company.
While the Florida real estate market remains strong, skyrocketing insurance premiums could hamper it, real estate agents say. Some out-of-state buyers flocking to Florida say they are stunned by their insurance bills.
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Ricardo Calina, 45, a former Wisconsin resident who closed a house in Winter Garden, near Orlando, in January, said he was upset to learn that he and his wife would pay about 25% more in home insurance, although the 4500 square meters. -foot Florida property is 500 square feet smaller than their Wisconsin residence.
“It’s frustrating to pay more for less,” Calina said.
Meanwhile, in Davie, near Fort Lauderdale, Alexander Barr worries about seeing the prize out of the house he grew up in and is now raising his two children with his wife. Earlier this month, they received a renewal notice from their insurance company informing them that their premium was increasing to $ 4,006, a 63% jump from the $ 2,451 they paid the last year.
“I can only imagine what’s going to happen next year,” Barr said.
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