It is an understatement to
say this is an interesting time to be a homeowner in Florida. The homeowners insurance crisis that has been years developing is still in full bloom as the
calendar keeps flipping forward toward another hurricane season.
FLORIDA HOMEOWNERS INSURANCE CRISIS
National insurance companies
and even some Florida-based ones are continuing to be selective in their policy
decisions, meaning homeowners in higher-risk hurricane areas of the state are
seeing their policies canceled. And those who still have insurance too often
are recognizing that premiums are unsustainably high.
There are several reasons for
the crisis. The most obvious one is that Florida is vulnerable to hurricanes.
Much of the state is a narrow, long strip of land that gives hurricanes a broad
target when they blow in. This is made worse by the state’s chief geographical
feature: It lies low against the water that laps its shores on two sides. There
are no mountain ranges to deflect Gulf or Atlantic wind or to build on above
flood levels. The state is a victim of its geography.
The impact on insurance
companies is only slightly less than on homes situated on this hurricane-prone
land. They are regulated entities that must charge higher prices for property
policies that are very likely to have claims brought against them. This
likelihood feeds the premiums that homeowners are anguished about. It also has
led to insurance companies pulling up and leaving the state altogether,
reducing choices and competitive pressures.
One of the consequences of
the reduced field of insurance companies is that the insurer of last resort has
become a first resort for many. Citizens Property Insurance Company is a
state-run nonprofit organization that in a relatively short time has become
Florida’s largest commercial and residential insurer, with some 1.5 million
While insurance companies,
like any other company, enjoy having many customers, Citizens’ large volume of
high-risk customers guarantees that the company has high exposure with every
hurricane landfall. A wipeout of a large residential and commercial area could
put Citizens at risk of being unable to pay all the claims brought against it.
As a result, the company is rolling back the terms of its coverage.
HOME INSURANCE IN FLORIDA
This crisis is far from over
for Florida homeowners insurance policyholders. While public authorities mull
their next move, including giving insurance companies incentives to return to
the state, all discussions are being conducted with one eye on the calendar:
Hurricane season is coming.