Florida’s latest homeowners insurance crisis is a mess decades in the making
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After a number of Florida insurance companies went belly up or left the state, Florida went shopping for an insurance ratings company that would give their stamp of approval to smaller companies who would offer lower premiums.
They found Demotech who recently notified a couple dozen Florida insurance companies that their rating had been downgraded, which means that their customers with FHA, Fannie Mae and Freddie Mac backed mortgages would need to find a new insurance company, or be forced to insure with companies with higher premiums.
Florida's solution is that Florida Insurance Guaranty Association, a state-run organization, would cover the first chunk of claims for any failed insurance companies.
Citizens, a state-run insurer, would foot the bill for anything over the limit of $500,000 for homes and $300,000 for condo units.
Now I can see why the state would be involved in regulating insurance companies. Lot of shifty characters out there.
But why is a state operating an insurance company? Is this a common?
Seems pretty obvious that these insurance companies couldn't charge a rate commensurate with risk so Florida had no choice but to have their own state run insurance. I don't know if any other state does the same.
My son and his family moved into their house in Panama City Beach about 2 weeks before Michael hit. Michael made a slight jog east and came ashore at Mexico Beach, destroying the place. His house suffered about $100K in damage including needing a new roof, a new screen over the pool on the back of the house, and several interior repairs such as new carpet, cleanup using Service Master. Their insurance company, one I'd never heard of, paid off promptly for the most part. Maybe they were just fortunate and got in contact with the insurance company early in the process.
Keep in mind this article was from August 12 before Ian. Over 40,000 homeowners lost their policy in the last 2 years, 14 companies have stopped writing policies, 5 have gone bankrupt this year. Average policy doubled since 2019.
Lack of tort reform, climate change and crooked contractors have all driven up the cost.
Living in the most hurricane-prone area in the country, probably hasn't helped.
And when a hurricane hits, rebuilding in exactly the same area is of questionable wisdom... to put it mildly.
The worst problem is letting people build in these areas in the first place. After the 1993, 100 year flood in Missouri, the government gave flood insurance to those who rebuilt in the flood plain. If people are stupid enough to rebuild in places that have been hit by floods, etc. repeatedly, no one can afford to insure them.
Seems pretty obvious that these insurance companies couldn't charge a rate commensurate with risk so Florida had no choice but to have their own state run insurance. I don't know if any other state does the same.
I was astounded when I first learned that the feds were subsidizing insurance for people who lived in areas prone to flooding. Why?
If insurance rates go up, people either pay it, go without insurance (if they own the place outright) , or move inland.
Why should the rest of us be subsidizing homeowners insurance for certain people?
Seems that encouraging people to move inland were be the smarter move.
Seems pretty obvious that these insurance companies couldn't charge a rate commensurate with risk so Florida had no choice but to have their own state run insurance. I don't know if any other state does the same.
I mostly agree with you, probably just semantics but Florida's voters don't want to pay those rates, so the state has mostly been forced to sell underpriced insurance via Citizens.
Every state pretty much has some sort of mechanism for people that can't get insurance. This is generally auto insurance but can apply to other types as well.
However, I don't think there is anybody out there that has anything even remotely close to this one time small program that has ballooned into well over 100billion in higher risk property exposure.
And then no mortgage company would lend in the state because of the very high risk that the collateral for their loans would be damaged beyond the borrower’s ability to repair them.
Baloney! Something like 50% of all home sales in Florida are CASH so lenders are irrelevant for that group. It's faulty logic to think that a person can afford a $200k to $400k house, but can't afford a $12k re-shingle job. If the roof is old, then the bank can simply require a new roof before approving the loan. Problem solved.
DD is in a part of Florida that had no storm damage this time. We were comparing home owner insurance this morning.
Her house is smaller than mine here in Houston. But valued at least 200K more.
Her insurance is 2000 a year with a 1000 deductible for anything.
Mine is 3500 a year with 1% for storm damage and 2% for anything else.
Makes me wonder who has the best insurance.
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