Florida's Insurance Crisis Could Get Even Worse

In an aerial view, homes sit on lots in a neighborhood on January 26, 2023 in Boca Raton, Florida.

More than one million homeowners in Florida covered by the state's insurer of last resort, Citizens Property Insurance, might face rate increases of as much as 14 percent next year, as the company seeks to shelter itself from future troubles following its explosive growth in the past year.

The skyrocketing cost of home insurance in Florida, driven by excessive litigation, widespread fraud and the increased risk of natural disasters hitting the state, has caused an ongoing crisis of the sector in the Sunshine State which has hit homeowners hard.

In 2023, Florida homeowners paid $6,000 per year in home insurance, according to data from the Insurance Information Institute (Triple I)—the highest rate in the nation.

The increased risk of facing damage claims so high that they could outweigh profits, together with the impossibility of raising premiums any further, has led several private insurers to withdraw or cut coverage across the state in the past couple of years.

As a result, thousands of Florida homeowners were left scrambling for options to insure their homes and turned toward Citizens for coverage.

Florida's insurer of last resort had a total of 443,229 policies in 2020, according to Citizens' own records. A year later, the number had risen to 554,537; in late January 2022, the insurers counted 776,790 policies. In December 2023, it reached a record number of 1,228,718 policies.

Faced with the growing risk of going insolvent should a potentially harmful hurricane season prove devastating for the state, Citizens is now looking to increase its rate by 14 percent starting in 2025. That means that policyholders will feel the change when they renew their coverage with Citizens next year, should the rate hike be approved by Florida legislators.

Rate increases are capped under state law; the cap for a primary home is 14 percent, while that for secondary homes is 50 percent.

"Like every insurer, Citizens has to balance what it takes in with what it pays out," Leslie Kasperowicz, managing editor of Insurance.com, told Newsweek. If Citizens' funds to cover claims were in doubt, "it's permitted by Florida law to levy an assessment against other Florida policyholders, which is obviously not what anyone wants," she added.

According to Kasperowicz, Citizens needs to increase rates "for the same reason as any other insurance company: so that it can pay claims while staying in the black [or financially solvent]. It's important to note that Citizens is a not-for-profit company."

Even with the increases, Citizens' rates will still be below the policy offered by private insurers, as the Tampa Bay Times reported. But it will still be a blow for those insured by Citizens, who'll face higher rates at a time when housing costs are growing.

Kasperowicz believes that the rate hike "will likely only affect those who are already with Citizens, but may also impact people who are coming to Citizens as rates increase much more steeply with private insurers."

But the move might have a positive impact too, as "it may be the avoidance of a levy assessment if the bad hurricane season that's been predicted for 2024 comes to pass," Kasperowicz said.

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