As the Florida hurricane season is starting to pick up, insurance companies and insureds alike are concerned about further rate hikes burdening an already floundering insurance structure. It’s no secret that insurers in Florida are struggling to care for their customers, and as more and more insurance companies enter receivership in Florida. Hurricane Ian already proved that Florida homeowners will struggle to get the coverage that they need to replace their homes and cover property damage, and the situation is only expected to get worse in the coming months.
Homeowners in Florida already pay the highest premiums in the United States, typically paying as much as three times the national average for a policy. Rampant issues with litigation surrounding claims and other problems with the way that insurance handles third-party entities involved in claims processes have further burdened the insurance structure until the first major cracks began to show. Insurance premiums will only continue to increase in cost as the hurricane season drags on, creating new challenges that insurers struggle to overcome.
Experts are predicting that there could be as many as six more named storms and up to four more hurricanes during the 2022 hurricane season. Considering the vast monetary value in damages caused by the storms that have already hit Florida this year, this could mean dire consequences for many more insurance companies, as well as steep insurance rate hikes for those who are lucky enough to still have homeowner’s insurance.
There is really not much question that insurance premiums for homeowners in Florida are going to go up in 2023. The question that insurance companies need to ask themselves is how to raise rates and still retain customers. The premiums that many Florida homeowners are paying are already more than they can afford. The likelihood that many people will choose to forego getting insurance or will simply walk away from a property that is currently damaged is very real.
Many insurance companies have indicated that they will increase premiums but that they will also be forced to alter the nature of coverage that they are going to offer to clients. This means that coverage will not be as generous and will not pay out as effectively as in previous years. This is a necessary adjustment for those insurance companies that do remain in business to make sure that they have money in the bank to help clients when they make claims.
Another major factor that could have a highly beneficial impact on the way that insurance companies operate and stay in the black is a reform to Florida insurance laws that will end the assignment-of-benefits practice that has led to years of costly litigation surrounding things like roof repair claims and other third-party claims for home losses. These cases have made Florida’s litigation costs in the insurance market skyrocket, leading to the deadly insolvency that sent many insurance companies into bankruptcy early this year.
Another change that might help impact the ability of Florida insurance companies to take care of their customers is a discussion about reform of the Florida one-way attorney fee statute, which has also led to excessive litigation and legal fees that add unnecessary costs to the process of resolving open claims and caring for customer needs. There have also been discussions about ways to improve the claims processing times statewide.
At the end of the day, no insurance company can operate if it does not have policy dollars flowing in from reinsurance at the end of every insurance cycle. While new insurance customers can help bolster the claims fun, the reinsurance income that insurance companies collect from existing clients at the end of every insurance period is what keeps insurance companies solvent. The falling reinsurance rates and the increasing number of people opting to go without homeowner’s insurance have also contributed greatly to the current insurance crisis.
Being able to find a balance between the current deficiencies in the system and the need to collect reinsurance premiums that will have to go up exponentially can be difficult. Insurance agencies will need to stress to homeowners that there are legal improvements on the horizon and that going without insurance during the hurricane season is not wise, even if the cost to reinsure is much higher than would normally be ideal.
Being able to bring down insurance premiums again and getting new insurance companies into the mix in Florida is the main goal of these various changes that are being made to try and resolve the insurance crisis. However, with the storm season not yet concluded, daily challenges will no doubt distract from these larger goals. Insurance companies will need to deal with the present while also having an eye on the future and beneficial changes that must be made to the struggling Florida insurance industry.
The recent movement to resolve the fundamental issues that have led to the current Florida insurance crisis should give everyone involved in this struggling industry hope for the future. In the meantime, insurers will need to be clear with those who still have insurance that they will want to reinsure and wait out the tough times to come. If new insurance companies are able to enter the market again and rates can be brought down enough to encourage people to insure their homes again, this will get back on track within a reasonable amount of time.
Insurance companies are also advised to take a hard look at the performance of their insurance policies and determine what their clients need most. Being able to remain relevant when there is so much turmoil in the industry is key, and insurance companies need to prioritize areas that are currently causing pain points for insureds while also looking to the future. Today’s problems are very present and will continue to be for some time, but the promise of a tomorrow without these insurance challenges can be just what is needed to keep Florida homeowners insured and waiting out the storm.