'It's criminal': Florida homeowners struggle as insurance rates soar. Here's why.

Thomas and Eileen Schoenberg had to get a new homeowners insurance policy when purchasing their St. Lucie County condominium in December 2019.

Capital Insurance Agency, Inc., had offered them a yearly rate around $1,100, Thomas Schoenberg said. But despite installing a new roof and hurricane-proof windows, the company raised the Schoenberg's policy to $2,600 the next year — a 136% increase.

The couple successfully found a cheaper alternative, a roughly $1,700 annual policy with Florida Peninsula Insurance Co., Schoenberg said, but faced a similar fate going into 2022: another price hike, this time reaching $3,000 a year.

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Neither insurance company justified the increase, he added.

"We're powerless. Insurance companies won't even talk to you. They do what they want to do," said Schoenberg, 71, who has lived in St. Lucie County for about 18 years. "It's criminal. It's absolutely criminal that we let them get away with this."

Homeowners insurance premiums

Many Floridians are in the same boat.

Homeowners insurance premiums are up nearly 25% this year and aren't expected to level off soon, said Mark Friedlander, spokesperson for the Insurance Information Institute, a nonpartisan association that provides insurance education and research.

Moreover, Florida had the highest average premium nationwide in 2021, at $3,600 — 157.5% more expensive than the $1,398 U.S. average, Friedlander said.

There are a few reasons why, industry experts told TCPalm: Unrenewed policies, fraudulent roofing schemes, increasing replacement costs and limited legislative oversight.

Dozens of insurance companies are either not renewing existing policies or no longer writing new ones statewide, including Progressive Insurance, Friedlander said, which this year dropped about 56,000 policies with roofs older than 15 years.

That's because business isn't turning a profit, Friedlander said, and insurance companies are shedding high-risk properties.

In 2020, Florida's insurance companies reported $1.6 billion in underwriting losses, he added, mainly caused by roofing fraud and increasing replacement costs.

"Insurers are bleeding terribly here," he said. "They are in such a precarious financial position right now. They don't want to continue taking on so much risk."

Roofing scams, supply-chain issues

Unethical roofing contractors were soliciting homeowners, enticing them with a free inspection and offering to handle repairs directly with insurers, Friedlander said. A majority were minor, wear-and-tear damages that normally aren't covered by insurance policies, he added, and contractors charged well above market rate.

Insurers wouldn't front the bill for these unnecessary and expensive repairs, but were then sued by contractors, Friedlander said. Insurance companies often lost these legal battles, left to pay both the roof repairs and court fees.

Repairs aren't cheap either.

In January, the homeowners replacement cost rate was 13.59% more expensive compared to that time last year, Friedlander said, due to supply-chain issues driving up lumber and labor costs.

All these added expenses are passed on to homeowners through rising premiums.

"Homeowners, in most cases, don't even realize what's happening here," Friedlander said. "They don't understand that this is driving insurance rates, which are skyrocketing in Florida."

At-risk homeowners are driving demand for roof replacements

Insurance agencies are cracking down on roof quality, said DJ Lira, owner of Shield Roofing and Exteriors, based in Orlando but servicing the Treasure Coast.

Lira estimated his business has seen a roughly 35% increase in inquiries from homeowners at risk of being dropped by insurers, he said, and about a 20% jump in demand overall.

However, Lira said he tends to agree with the insurance companies, adding that a 15-year-old roof likely won't withstand the hurricanes southeast Florida is prone to, and should be replaced.

Though roofs do start to show signs of deterioration after 10 or 15 years, Jon Ashenback, owner of Atlantic Construction and Roofing in St. Lucie County, said about half the ones his company recently replaced weren't in detrimental condition.

One Jensen Beach home, he recalled, was old but very stable. However, the homeowners had already received a 30-day notice from their insurance company to completely replace the aging roof or else the policy wouldn't be renewed.

Are these price hikes legal?

The short answer is yes.

There is no limit to how much private insurance carriers can increase annual rates, Friedlander said. Moreover, all policies — new or rewritten premiums increasing by 15% — are approved by the state's Office of Insurance Regulation.

However, there isn't legislation regulating the issues currently facing the insurance market, such as roofing fraud. That may change soon.

A bill intended to allow insurers to pay roof claims based on the actual cash value, and not the full replacement value, is moving through the Legislature that ends March 11.

The Republican-proposed Senate bill passed through a subcommittee with little opposition Feb. 16. It needs to clear one more committee before going to the Senate.

Citizens Property Insurance Corp.

There's one place for Florida residents to turn when homeowners insurance is out of reach: Citizens Property Insurance Corp., a state government agency that covers those unable to find affordable policies in the private market.

The corporation has seen a 40% increase in demand over the last year, said spokesperson Michael Peltier, and now manages over 759,000 policies.

"There was a need for a state-created entity for folks who couldn't find insurance," he said. "We are pretty much the last stop."

Premiums are determined based on the location and value of each property, Peltier said. There is no limit on how many policies the corporation can issue, and annual rate increases are capped at 11%.

Homeowners don't automatically qualify for coverage, however. The property must be "eligible to be insured," Peltier said, and undergo an inspection to ensure there are no significant issues.

Another bill moving through the Legislature aims to alleviate Citizens' growing demand and would make it harder for seasonal Florida residents to qualify for coverage. It also needs to clear one more committee until going before the Senate.

Last resort: Expensive surplus market

Homeowners who cannot find insurance privately or with Citizens have one final option: the surplus market — but don't expect affordability.

The surplus market operates differently, Friedlander said, and is dominated by global companies that take on riskier properties and do not need the state to approve its rates.

"Higher risk insurers charge higher rates," he said. "You're going to pay a lot more premium with a surplus insurer than you would with a Florida domicile insurer."

Mortgage agreements stipulate homeowners must be insured, Friedlander said. Those who aren't may face foreclosure.

Residents who have paid off their mortgage legally aren't required to have insurance, but Friedlander strongly advised against that.

Will Legislature protect homeowners?

Industry experts believe homeowners insurance rates will continue increasing in the future, Friedlander said, and are predicting an $1,100 hike in the average Florida premium this year.

The only solution is government regulation, Friedlander said.

"We don't see any quick fix here," he said. "There's so much in the pipeline right now, so much litigation ... we expect to see increased rates continue at least for the next couple years, unless there are dramatic changes in the Legislature."

Catie Wegman is TCPalm's community and real estate reporter. You can keep up with Catie on Twitter @Catie_Wegman, on Facebook @catiewegman1 and email her [email protected].

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