Florida home insurance cost hikes slowed at end of 2023; crisis may be ending

And many insurance insiders are optimistic that rates will continue to stabilize this year and next, barring a big costly you-know-what.

According to an analysis by the South Florida Sun Sentinel of publicly released data by the Florida Office of Insurance Regulation, the statewide average premium to insure a single-family house increased by 23.9% — from $2,798 at the end of June 2022 to $3,466 at the end of December 2023.

But the quarter-to-quarter growth rate fell to 2.6% in the fourth quarter compared to the third quarter. That’s down from a high of 4.8% between the first and second quarters of last year.

The average statewide premium to insure a condo unit increased by 22.9% over the 18-month period, from $1,343 to $1,650. But the rate of increase similarly fell to 2.1% in the final quarter of last year after peaking at 5.9% between the first and second quarters of 2023.

Over the same 18-month period, the rate of inflation in the United States increased by 4.7%, according to data in the Bureau of Labor Statistics’ Consumer Price Index.

The Office of Insurance Regulation released the statewide quarterly data recently as required by a provision in a package of insurance reforms enacted by the state Legislature and governor in May 2022.

All Florida-domiciled insurers are required to submit reports that includes total numbers of policies, total premiums paid, and total value of insured property for each type of policy they sell. The data used in the Sun Sentinel analysis was derived by dividing the total number of policies into the total premium for both houses and condos.

A statewide average premium doesn’t necessarily reflect reality in South Florida, where insurance costs have outpaced the rest of the state for years. And the average premium is likely higher than what homeowners in northern, inland counties pay.

But it’s the best measure available for comparison, since insurers several years ago began shielding their county-level premium data from public view by declaring it a “trade secret.”

Dulce Suarez-Resnick, vice president of NCF Insurance Associates in Miami, said participants at last month’s Florida Insurance Market Summit in Orlando voiced confidence that we’ve weathered the storm.

They believe that after increasing slightly this year, rates will begin stabilize or begin decreasing next year as a result of lower litigation rates, price competition among new carriers entering the Florida market, and lower costs for reinsurance — that’s insurance that insurers buy to make sure they can pay all claims after a catastrophe.

“We’re getting really excited about rate relief but it could all change by one thing — a major hurricane hitting,” she said.

As usual, insurers and their customers will approach this summer’s hurricane season with wary eyes. A powerful and destructive storm, if it hit a major population center, would raise insurer costs and make hoped-for rate cuts less likely, Suarez-Resnick said.

Forecasters with Accuweather and Colorado State University are calling for a much-busier-than-normal hurricane season, thanks to record warm sea-surface temperatures in the Atlantic Ocean and a rapidly developing La Niña event, which reduces wind shear and creates favorable conditions for storm development in the Atlantic.

More insurers enter market

The slowing of the rate increase in the fourth quarter was just one of several developments that have given insurers and consumers reason to be optimistic.

Eight new insurance companies have been approved by the Office of Insurance Regulation to enter the state’s insurance market. They are Ovation Home Insurance Exchange, Manatee Insurance Exchange, Condo Owners Reciprocal Exchange, Orange Insurance Exchange, Orion180 Select Insurance Company, Orion180 Insurance Company, Mainsail Insurance Company, and Tailrow Insurance Company.

Ovation Home Insurance Exchange, the newest company, was created by the same company that owns Florida Peninsula and Edison. It’s being built with “separate and dedicated capital” says Stacey Giulianti, chief legal officer at Florida Peninsula.

“It stands on its own, so it’s a separate pool of capital to be put at risk,” Giulianti said. The company will also introduce “a new algorithm to select and rate policies, which is more granular than (what’s used by) Florida Peninsula or Edison.”

The new algorithm “will allow us to more precisely charge customers an appropriate — and in most cases less expensive — policy premium,” he said.

Insurers are back in black

Florida-domiciled insurers reported making a profit last year for the first time since 2016.

Marketing intelligence company S&P Global announced the result last month, crediting the turnaround to investment income, a mild hurricane year, and tort reforms that took effect in March 2023.

While the top 50 companies also posted an underwriting loss for the eighth straight year, the combined loss of $190.8 million was much lower than losses of nearly $1.8 billion in 2022 and $1.52 billion in 2021, S&P Global noted.

State-owned Citizens Property Insurance Corp. posted a net income of $746 million compared to a $2.2 billion loss in 2022, and its combined ratio — a measure of profitability — improved from 202.4% to 59.4%. Insurers regard a 100% combined ratio as a break-even point, with profitability improving the further the number declines below 100%.

Citizens has successfully used depopulation to decrease its policy count from 1.4 million in September 2023 to 1.17 million by the end of February.

Reduced litigation costs

A Sun Sentinel analysis in January showed that the number of lawsuits filed against the state’s top 25 insurers fell by 13.2% between 2022 and 2023 — from 44,550 to 38,678.

Jerry Theodorou, policy director, finance, insurance and trade for R Street Institute, a center-right-aligned think tank that supports “free markets and limited, effective government,” published an essay on Thursday proclaiming that “the situation is much better” for Florida’s beleaguered insurance market.

Prior to the reforms that took effect in 2022 and 2023, insurers were caught under “mountains of unmerited litigation,” Theodorou wrote.

A large percentage of litigated claims was among several factors that triggered liquidation proceedings against three insurers in the 2022-2023 budget year, according to the most recent annual report of the Florida Department of Financial Services’ Division of Liquidation and Rehabilitation.

In preliminary insolvency reports by the division, litigation was also mentioned as a contributing factor that led to the liquidations of Southern Fidelity Insurance Company in June 2022 and United Property and Casualty Insurance Company in February 2023.

S&P Global’s report stated that spending on legal defense costs by Florida insurers as a percentage of premium fell from 8.4% in 2022 to 3.1% in 2023, he said. That’s still higher than the overall industry average of 1.2% but a significant drop nonetheless, Theodorou wrote.

Lower rate hikes — and some reductions

Rate change requests for the upcoming year have been minimal so far compared to recent years — except for condo unit coverage.

Florida Peninsula plans to seek approval from the Office of Insurance Regulation for a 2% statewide average rate decrease, Giulianti said.

Slide Insurance Company is seeking a 0.5% decrease in the average rate it charges to insure single-family houses.

Florida Family is seeking an average 0.5% decrease across its line that includes houses, condo units and rentals, effective Aug. 1.

Castle Key Indemnity, the Florida-based company owned by Allstate, has requested no change in rates for all homeowner policies, effective Aug. 4. But that comes on the heels of a 54% rate hike for condos that was requested a year ago and took effect in May of last year.

Kyle Ulrich, president and CEO of the Florida Association of Independent Insurance Agents, said, “Agents are seeing positive trends relating to pricing and coverage.” But he noted “those trends vary depending on geographic location.”

Still, some carriers so far have requested increases this year as they prepare to enter hurricane season.

They include Vault Reciprocal Exchange (10.4% for single family houses and 8.4% for condo units); Tower Hill Insurance Exchange (7.4% for single-family houses); and Homesite Insurance Company (average 2.3% for entire line).

Several rate hike requests for coverage of condo units are notably higher than those for houses.

Slide requested a 7% increase for condo units, which took effect on March 26. Nationwide Mutual’s 13.1% rate hike request for condo units is much higher than its 0.6% increase sought for houses.

First Protective is seeking a 9.9% increase for condo coverage and a 1.0% hike for houses.

And four companies owned by Chubb — Great Northern, Vigilant, Pacific Indemnity and Federal Insurance Company — are asking for a 30.7% increase to cover condo units and no increase for insurance covering houses.

The requests come on the heels of similar increases for coverage of condo buildings. Costs for that coverage have been rising as a result of laws enacted to prevent another catastrophe such as the collapse of the 12-story Champlain Towers South building in Surfside in June 2021.

Agent says rate hikes lower in South Florida

South Florida homeowners who experienced annual insurance price increases of 25% to 30% over the last few years are looking at more modest rate hikes of 15% to 17% this year, Suarez-Resnick said.

“That’s still a big hit for people in Miami-Dade, Broward and the Keys who are paying $6,000 to $7,000 a year,” she said.

Overall, though, reinsurance rates declined in January and February and are expected to decline again by the time insurers make their hurricane season reinsurance buys, Suarez-Resnick said.

George Attard, CEO of Asia Pacific for Aon’s Reinsurance Solutions, told the website Reinsurance News in late March that the reinsurance market heads into hurricane season offering “adequate capacity for property casualty risks and enhanced pricing competition.”

A reduction in reinsurance costs, triggered by a decline in litigation and a mild year for hurricanes in 2023, will help to stabilize or even reduce homeowner insurance rates next year — if nature cooperates and spares us the cost and heartbreak of a major hurricane, Suarez-Resnick said.

“That’s one thing we can’t control — Mother Nature,” she said.

Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071, on Twitter @ronhurtibise or by email at [email protected].

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