Property insurance faltering

"A direct (hurricane) hit would be pretty catastrophic to the state and to Citizens, leaving a lot of homeowners in peril, essentially."

Logan McFaddin

Vice president of government relations at American Property Casualty Insurance Association

Like many homeowners, Larcy Sorensen's insurance premiums have gone up thousands of dollars in recent years while her salary hasn't kept pace.

Sorensen, of Jacksonville, recently saw an increase in her annual premium for the second year in a row. The first increase was $1,200 in 2021, and this year brought an additional $1,000 bump.

Now, she's on the hunt for a competitive alternative — and coming up short.

"It's a bit disheartening," she said. "I've contacted 10 or so companies, [and] I'm getting a lot of 'no's."

Sorensen is one of the millions of Floridians who will see premium or deductible increases on their property insurance this year. And some may even see their policies canceled altogether.

Homeowners have been receiving non-renewals or unprecedented rate increases — sometimes as much as 25-40% — for properties in Florida over the last few years.

The Florida Legislature wrapped up a special session on property insurance reform May 26. It passed legislation to enhance safety of condominium buildings after the Surfside collapse last year and also to reform litigation, which has been an issue in Florida, and offer incentives for strengthening homes against hurricanes.

Excessive abuse, fraud and litigation with attorneys are some of the top issues facing Florida's insurance industry, said Logan McFaddin, vice president of government relations at American Property Casualty Insurance Association.

A litigious industry

"Florida, of the 50 states, is only responsible for 9% of homeowners insurance claims, but we make up 79% of lawsuits for those claims," McFaddin said. "A lot of the money that is paid out to insurers, our consumers, doesn't go to them; it goes to attorney fees and public adjusters."

McFaddin said about 71% of money that gets paid out in these lawsuits goes to attorneys and public adjusters rather than the homeowners.

As a result, McFaddin said, companies are trying to protect themselves from the risk of a litigious marketplace — and one where natural disasters, such as hurricanes, flooding and sinkholes, are more likely — by reducing the number of homes they insure and the risk level of these properties.

Sorensen said each insurer gives her a different reason for why she isn't finding what she wants, from being denied for her roof being too old to seeing an initial quote nearly double because she doesn't have a specific type of hurricane protection in her attic.

"We've been told that companies are either no longer writing in the state of Florida or that they're only writing certain types of policies," she said. "One said they will only cover condos and renters insurance. One place said they don't provide wind mitigation. One said the roof can't be more than 10 years old."

Sorensen said her home was built in 1928 and has received upgrades in the last 10 years including plumbing, electrical and HVAC. Her roof is 14 years old, though, and even though her house has been standing for nearly 100 years without an issue, insurers don't seem to "consider everything."

"You wonder what the point of getting these inspections where someone will tell you you have seven or eight years left on your roof, and the insurance company is telling you that's not good enough," she said.

Sorensen said she's "very worried" about being stuck with her current insurance and having to come up with the extra money, and she's down to less than a month left before she needs to decide whether or not to keep her current policy.

"It doesn't benefit the consumer because then insurance goes up," McFaddin said. "We have seen many insurers in the state not renew policies, not write new business, canceling policies that they think are at too much risk."

Four homeowners insurance companies have gone under in Florida since February, she added. And the policy count for Citizens Property Insurance, Florida's state-backed insurer of last resort, has grown to almost 900,000 in June.

McFaddin said she anticipates seeing Citizens insuring 1 million people by the end of the year.

"With the rising rate of policyholders going into Citizens, that's not good for the state," she said. "A direct hit [from a hurricane] would be pretty catastrophic to the state and to Citizens, leaving a lot of homeowners in peril, essentially."

The best solution here, she said, would be to increase marketplace competition in order to lower costs for consumers and give them more choices.

The future of the insurance industry

Sorensen said she doesn't have a lot of hope for the future of homeowners insurance in Florida, despite the special legislative session and apparent focus on improving the industry in the state.

"These things can't happen quick enough when folks need assistance," she said. "When you're told insurance premiums are on the rise because of fraudulent claims and attorney fees and roof fraud and those types of things, you feel like you're being penalized for some unfortunate things that have happened to some other people."

She described the increases as feeling "punitive."

As far as solutions, McFaddin said, it took "a long time to get here, and the market has been deteriorating for several years."

"I think it will take some time for the bills passed in the special session to really start to have an impact for consumers and bring those rates down," she said.

Still, the special session produced "the most reform we've seen in decades in insurance in Florida."

In the meantime, McFaddin suggested consumers talk to their insurance agents to see if they have better options.

It's something she is doing personally, too — her insurer also opted not to renew her policy this year.

"A direct (hurricane) hit would be pretty catastrophic to the state and to Citizens, leaving a lot of homeowners in peril, essentially."

Logan McFaddin

Vice president of government relations at American Property Casualty Insurance Association