Why Does My Homeowners Insurance Keep Going Up?

If you own a home in Florida, then it’s very likely you’ve seen an increase in your homeowner's insurance over the last couple of years or you may have even been dropped by your carrier altogether. In all honesty, we’re on the verge of an insurance crisis. Some might say we’re already there. It’s a hot-button topic right now that’s being discussed in the Florida Legislature and an issue lawmakers can’t seem to agree on. So what’s it all about?

To give you a brief background: the 2022 Florida Legislature proposed a property insurance reform bill that was passed in the Senate but failed in the House, so we’re still waiting on a resolution, and unfortunately, it likely won’t be discussed again until November.  But here’s what’s on the table. The bill basically has two major provisions that would affect homeowners: First, it would allow insurance companies to offer policies that cover only the actual cash value of a roof, as opposed to full replacement, and the second part of the bill is aimed at reducing Citizens Property Insurance policy count. So let’s break down what these measures would mean for homeowners. But first, how did we get into this mess in the first place?

There are a number of factors that play into Florida’s insurance crisis, but the driving factor is quite simply the number of claims paid out in the state. It’s estimated that insurance companies have paid out roughly $3.5 billion in claims in the last two years alone, and in the last two years, we haven’t even had a major storm hit our coastline. Roof litigation is at the center of the crisis. There were 117,000 claim lawsuits filed against property insurers in Florida in 2021. To put that into perspective, there were fewer than 900 claims filed in each of the other 49 states. And unfortunately, where there’s money there’s a fraud, and we’ve seen a number of unscrupulous, fly-by-night roofing companies that are taking advantage of the system. As a result, Floridians pay more than double the national average for homeowners insurance.

Insurance officials blame roof-damage claims as to the primary catalyst for driving up costs. As it stands currently, even if your roof is 30 years old and on its last bit of life, you can make an insurance claim and get a brand new roof, assuming it was a qualifying event that caused the damage. People are essentially using their insurance policies as warranties for full roof replacement, and when the cost of a new roof is upwards of $15,000, those claims add up quickly.

So what’s the solution? The proposed bill would have allowed insurance companies to sell policies that would not offer replacement coverage for roofs older than 10 years in age. Instead, roofs would be replaced by the actual cash value. In other words, roofs would be replaced at their depreciated value, so homeowners would only get a portion of the replacement cost and would need to come out of pocket for the rest.

Another major contributing factor to Florida’s insurance crisis is the number of companies pulling out of the state. Last year two companies, St. Johns Insurance Co., and Avatar Property & Casualty Insurance went insolvent, and another five companies opted not to renew more than 120,000 policies in Florida. This has pushed an alarming number of homeowners to use Citizens’ Property Insurance. This brings us to the second part of the Bill, which is aimed at reducing the Citizens' policy count.

Citizens' is known by many as an insurer of “last resort.” It was created by the Florida state government for homeowners that couldn’t obtain insurance anywhere else. It’s a government-owned and not-for-profit company that insures homes that the private market won’t cover. In simple terms, it’s state-subsidized insurance, and the problem with this is if Citizens is unable to pay its claims, the shortfall becomes the responsibility of all other property owners in the state.

Currently, Citizens’ rates are capped at 10% increases per year, while some private insurers have seen rates rise by more than 30%. Those sharp rate increases have pushed thousands of homeowners a week to Citizens. There are currently more than 800,000 policies, and with each new policy signed, the financial risk increases in the event of a major hurricane or multiple hurricanes as we’ve seen in years past. If Citizens run into a deficit in paying claims, it could lead to homeowners across the state getting hit with the tab. 

Unfortunately, lawmakers haven’t yet been able to reach an agreement on the bill. After failing to pass in the regular session, there were calls for a special legislative session, but according to Governor DeSantis, it will be discussed in November at the latest. Regardless this is an issue that isn’t going away on its own.