July 14, 2024

Another insurer is leaving Florida, where homeowners are paying more than ever for insurance, despite the state’s attempt to shore up the wobbling market.

On Tuesday, Farmers Insurance informed the state it was dropping home, auto and umbrella policies across Florida, potentially affecting tens of thousands of people. It’s the fourth company to leave the Florida market in the last year — most citing rising risks from hurricanes. Farmers, a large company with a national presence, also has reduced new business in California, citing extreme weather and wildfire threats.

“This business decision was necessary to effectively manage risk exposure,” the company wrote in a statement.

Farmers said the decision to withdraw affects about 30% of its overall policies around the state, but not ones issued through its subsidiary companies. Those — including auto insurer Bristol West and home insurer Foremost — are unaffected.

The company declined to speak on the record about how many people would lose coverage. Figures from Florida’s Office of Insurance Regulation show that Farmers has about 93,000 current home and auto policies, but an industry source suggests that number is currently closer to 100,000.

The day before Farmers made the decision public, Florida’s Chief Financial Officer Jimmy Patronis tweeted that his office has had “zero communication” with the company and vowed to “explore every avenue possible for holding them accountable” for leaving Florida.

Florida’s Office of Insurance Regulation said in a statement that the office was reviewing Farmers’ notice, which was sent to the office on Monday and marked a “trade secret,” limiting what regulators could say about it.

Under state law, insurers are required to give 120 days’ notice to customers before their policies are dropped. Customers who receive a notice are encouraged to contact their agent immediately to find alternative coverage, the office said in a statement.

Later Tuesday, the office also formally chastised Farmers for not giving the office a heads-up before deciding to pull out of the state. In a letter, Florida Insurance Commissioner Michael Yaworksy also noted that Farmers made the decision to leave Florida “independently” of the state’s insurance reforms.

“We are disappointed by the hastiness in this decision and troubled by how this decision may have cascading impacts to policyholders,” Yaworsky wrote.

“Farmers has noted this decision only impacts about 26.6% percent of their Florida policyholders, but any impact which impacts policyholders should not be taken lightly.”

Leaving despite reforms

Tuesday’s announcement follows a mid-June decision from Farmers to stop writing new policies in Florida due to the skyrocketing costs of hurricane recovery and rebuilding.

“With catastrophe costs at historically high levels and reconstruction costs continuing to climb, we implemented a pause on writing new homeowners policies to more effectively manage our risk exposure,” Farmers said in a statement.

Notably, Farmers did not mention lawsuits, which has been the main culprit Florida insurers point to when asked why costs are rising so fast. However, financial autopsies of failed insurers in Florida regularly point to excessive payouts, high salaries and fees to affiliated companies as the main problem that leads to bankruptcy.

The decision by Farmers follows years of turmoil in the state’s property insurance market, triggered by a series of hurricanes starting in 2017. Floridians pay the highest property insurance premiums in the nation, and 13 companies have gone insolvent in recent years. Many others have stopped writing new policies or pulled out of Florida.

Gov. Ron DeSantis and state lawmakers have responded by making it harder to sue insurance companies and assigning $3 billion to help them withstand storm seasons. A report by the state’s Office of Insurance Regulation released last week indicated that the industry broke even during the first quarter of 2023 after years of heavy losses.

But the legislation has failed to reduce premiums for homeowners. Premiums continue to go up, according to the office’s report. Between November and March, rates increased 5% in Miami-Dade County, to an average of $5,665.

The rate increases were higher in Hillsborough and Pinellas counties, rising 9.5% and 9.25%, respectively. Homeowners in Hillsborough County are paying an average of $2,752, and $3,210 in Pinellas County.

“Premiums are through the roof”

Floridians top the nation in insurance costs, said Mark Friedlander, corporate communications director for the industry-funded Insurance Information Institute.

Friedlander said the average premium in Florida is 42% higher than last year’s and miles ahead of the average premium nationwide — $1,700.

“It’s brutal,” said Vince Perri, head of Key Biscayne-based public adjuster firm Elite Resolutions. “The premiums are through the roof. It’s always been high here, but it’s worse now.”

Perri, who’s been in the business for more than a decade, said he sees the back-to-back storms in recent years as a major factor in rising prices. Hurricane Ian last year was Florida’s most expensive storm, causing more than $109 billion in damages across the state.

If Florida can scrape by a few more years without a hurricane landfall, Perri said, he believes insurance costs will start to go down again.

“It’s going to take a couple of years for the market to level out again,” he said. “I think insurance premiums are going to be high for a while.”


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