The Florida Insurance Company Crisis

Over the past few months, at least a dozen insurance companies have been liquidated, dropped customers, or left the state of Florida, leaving hundreds of thousands of Floridians scrambling for insurance. Insurers cite lost profits, despite premiums in the state being nearly double what they are in the rest of the country, and many Floridians have been faced with the reality of their insurance premiums surpassing the cost of their mortgages.

Liquidation is a similar process to bankruptcy, whereby an insurance company's liabilities are paid out from its assets in accordance with state law. Liquidation also forces the Florida Insurance Guaranty Association to take over existing claims. The claims are paid out on an equal basis with all other claims in the same category of property damage to the extent of available liquidated funds. This means some homeowners may end up not receiving payment for a valid claim, and leaves the homeowner responsible for repairing damage that should have been covered. Even if a claim is paid out, payment may take years to be received from the Guaranty Association. All policyholders of liquidated companies, regardless of whether they have an open claim or not, are forced to seek new coverage, unless another existing insurance company is able to successfully petition the state for permission to take over those policies.

In addition to liquidated companies, Florida is also facing a shortage of insurers. Progressive, Farm Bureau Insurance, UPC, are among dozens of insurers which have recently refused to write new homeowner's insurance policies in Florida and have dropped hundreds of thousands of policies. Those whose policies were not dropped are now facing triple-digit rate increases, with one insurer requesting a 198% increase in policy renewals.

The Florida Legislature has recognized the immediacy of the issue, with one senator even going as far to state that the cost of property insurance could soon exceed the cost of many homeowners' mortgages. However, despite the recognition, the Legislature has failed to find adequate solutions to help homeowners and are quickly passing another bill, Senate Bill 1728, which is aimed at assisting insurance companies rather than homeowners.

Senate Bill 1728, as discussed in further detail here, would allow insurers to offer policies that would only cover the actual cash value of a property's roof, which would leave homeowners on the hook for costly, necessary repairs and replacements. This actual cash value coverage would likely not be accepted on mortgaged properties, as most lenders require the replacement value to be covered. In essence, the bill would merely shove the costs to consumers, in an attempt to appease insurers.

With homeowners facing record-high insurance premiums, a shortage of insurers, and risk of liquidation, the Florida Legislature needs to work to protect the consumer rather than the insurance company. As of now, it appears the latest "solution" will just add more protection for insurers in the state, allowing them to continue to deny or underpay valid claims while collecting enormous premiums from homeowners.

This article is not intended to be legal advice nor create an attorney-client relationship.