Florida property insurers are jacking up rates by double-digit percentages, blaming the hikes on lingering damage from past hurricanes, a wave of litigation, and a law that encourages lawyers to sue by allowing courts to award them big fees.
The rate increases in Florida, the third-largest property insurance market among U.S. states, are the highest in memory, according to some insurance agents and residents. One danger, they say, is that the new rates could make owning a home in Florida unaffordable.
“I was flabbergasted,” said Karlos Horn, a 35-year-old law student who owns a four-bedroom, single-family home in Hendry County, Florida. He said his premium doubled to $200 per month last August.
That is equivalent to half of his $400 mortgage payment and the largest increase in his five years as an owner.
Florida’s property insurance market, which collected $56.6 billion in premiums during 2019, is unique and covers complex risks including devastating hurricanes and the impact of climate change. Many insurers left the state after suffering big losses from hurricanes Katrina and Wilma in 2005, leaving about 60 small and mid-sized firms underwriting property policies there today.
Although there were no major weather events last year, some insurers are still grappling with claims from Hurricane Irma in 2017, said Logan McFaddin, an American Property Casualty Insurance Association executive who specializes in Florida.
They are also facing what McFaddin described as “out of control” litigation in Florida, partly because of a law that can require insurers to pay attorneys “excessive fees” in those cases. The practice has spurred a cottage industry of contractors and lawyers who sue insurers to replace a whole roof when only a few tiles are damaged, insurers say.
Other less dramatic problems, such as leaky pipes, happen at an “abnormally high” frequency in Florida, often causing severe damage, including mold, consistently gnawing at profits, said Charles Williamson, chief executive officer of Vault, a Florida-based insurance exchange for wealthy individuals.
Insurers are also passing along to consumers the cost of hefty rate hikes for their own coverage, known as reinsurance, which kicks in after insurers pay a set amount of claims.