ORLANDO, Fla. — Despite massively raising prices for homeowners over the past few decades, the 52 property insurance companies serving Florida are bleeding money, regulators and lobbyists said.
The claims have lawmakers thinking about another round of changes to prop up the struggling industry as consumers complain insurance is hard to get and expensive to hold on to.
“Their issue is very, very simple,” one regulator told a Senate committee Tuesday. “They either raise rates or these companies go out of business.”
Property insurance is not required by Florida law, but it is required by mortgage lenders. That means for most homeowners in the state, it’s a necessary expense.
Tenants are also affected because many landlords pass on property insurance costs through lease agreements.
According to LendingTree, Florida’s property insurance costs rose three times faster than the national average between 2016 and today. The report said Florida’s largest company raised its rates by 183% during that period.
Florida’s rates were generally expected to be higher than those of other states because of hurricanes and other severe weather, but companies have complained that their profits were affected by unnecessary lawsuits and roof replacement claims that flood in from companies that go door-to-door looking for damages.
The challenge is so significant that some companies are trying to leave the market, disposing of their customers to help their bottom line.
“Older homes are having major problems [acquiring insurance] unless they’re fully renovated,” one agent noted. “The problem is that we have bad apples.”
The rapid increase has put an already expensive necessity out of reach for many. Florida’s government offers assistance in the form of Citizens Property Insurance Corporation, a state-backed company that offers below-market rates to people who cannot afford private insurance.
Rep. Anna Eskamani (D-Orlando) says lobbyists are pushing the state to prod Citizens to raise its rates and cut advertising to drive more customers to their offerings, after reports showed the corporation has added 200,000 new customers in the past year.
“They want Floridians to not know about Citizens, and I think that’s a big mistake,” she said.
Eskamani said Florida’s government already tried that approach the last time industry lobbyists came knocking for help, with little to no improvement. She said the better course of action would be to fund improvements to homes to make them more storm resistant, which would lower premiums and cut claims.
Additionally, she suggested opening Citizens to compete with the private companies, allowing anyone to sign up for the cheaper prices offered by the corporation. Citizens is able to undercut the private market because the other companies have their own insurance policies, the costs of which are passed on to consumers, she explained.
“If you allow Citizens to be available to a diverse community of consumers, there’ll be folks of varying risk levels so they can support one another so one hurricane doesn’t impact everyone’s claims,” she said, noting that previous proposals to do this have received bipartisan support.
Those proposals were opposed by insurance companies that didn’t want the competition, she said.
Eskamani accused her fellow lawmakers, especially the leaders of committees who regulate insurance companies, of being financially tied to the industry. Insurance corporations are some of the biggest donors to Florida’s politicians, spending upwards of hundreds of thousands of dollars on individual high-profile races in the Sunshine State, according to election filings.
Eskamani said politicians have been subject to the whims of the industry for too long, focusing on keeping their cash flows going instead of figuring out ways to cut costs for consumers.
“I don’t think we can have a legitimate conversation about property insurance when the leaders who chaired these committees are swimming in insurance and reinsurance company money,” she said. “We need to play a leadership role in holding these companies accountable, but also building a more equitable system where people can actually access property insurance.”
When asked why she was supportive of the government being involved, rather than the free market deciding what rates should be, she pointed out that the free market was collapsing.
“I think it’s pretty clear that the market cannot provide an equitable access to something that is required,” she said.