Insurance Costs Threaten Florida Real-Estate Boom

MIAMI—Florida’s property-insurance market is in trouble, as mounting carrier losses and rising premiums threaten the state’s booming real-estate market, according to insurance executives and industry analysts. Longtime homeowners are getting socked with double-digit rate increases or notices that their policies won’t be renewed. Out-of-state home buyers who have flocked to Florida during the pandemic are experiencing sticker shock. Insurers that are swimming in red ink are cutting back coverage in certain geographic areas to shore up their finances.

Various factors are at play, insurance executives and analysts say. Two hurricanes that slammed the state—Irma in 2017 and Michael in 2018—generated claims with an estimated cost of about $30 billion. The cost of reinsurance, which insurers take out to cover some of the risk in the policies they sell, is swelling. Of particular concern, executives say, are excessive litigation over insurance claims and a proliferation of what insurers see as sham roof-related claims.

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Eric Firestone, a 37-year-old teacher who lives with his wife in the Miami area, received a letter from their insurance company in February saying their policy wouldn’t be renewed because the carrier was no longer servicing their area. When their insurance agent shopped for an alternative, the cheapest one she could find had a $9,644 annual premium—an 85% increase over their most recent premium of $5,205. “Where am I going to get the extra $4,000?” Mr. Firestone said. “Worst-case scenario, I will have to go into credit-card debt.”

Florida is the most expensive state in the U.S. for home insurance. Residents are projected to pay on average $2,380 in premiums this year, a 21% increase over the $1,960 paid in 2018, according to estimates by trade group Insurance Information Institute. By contrast, the average American homeowner is expected to pay $1,297 this year, up 4% from $1,249 in 2018.

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Florida lawmakers are considering bills that supporters say would help curb premium increases. Among the provisions of a Senate measure backed by the insurance industry and passed by the Republican-led chamber are limits on attorney fees and roof coverage that proponents say would reduce incentives for frivolous lawsuits and claims.

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Many Democrats and plaintiff lawyers oppose the bills, saying they would hurt consumers by limiting legal recourse against insurance companies. Opponents say the insurance industry is exaggerating the role of fraud in its deteriorating finances and playing down the significance of losses from natural disasters and rising reinsurance rates. While Florida made up 8% of all homeowner insurance claims in the U.S. in 2019, it accounted for 76% of homeowners’ insurance lawsuits, according to an analysis by Mr. Altmaier’s office.

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https://www.wsj.com/articles/insurance-costs-threaten-florida-real-estate-boom-11619343002 (subscription)