Almost every day we receive calls or emails from upset clients whose insurance premiums are going up, even when they’ve never made a claim. Some policies are going up by hundreds of dollars per year—what is happening?
The Florida insurance market is in crisis, particularly the homeowners and auto insurance sectors. A perfect storm of factors is contributing to today’s skyrocketing premiums and a market in which it’s getting harder to find insurance at all. In addition to rate increases, insurance companies are pulling out of Florida and tightening their underwriting guidelines. Florida consumers are facing insurance premium sticker shock and are finding it harder and harder to get the insurance coverage they need at a price they can afford.
Why insurance premiums are skyrocketing
As a locally-owned, independent insurance agency, Lakewood Financial is committed to helping you find insurance that fits your needs and that you can afford. We also want to help you understand the factors contributing to this crisis. Here are the main reasons Florida insurance is seeing such steep increases:
Catastrophic losses. In 2020, Florida insurers lost nearly $1.6 billion dollars, and are reporting even greater losses in 2021. These losses mainly stem from litigation and reinsurance costs (see below), as well as continued payouts for hurricanes Irma and Michael.
Reinsurance costs. It might seem odd that wildfires in California or Australia would affect the price of insurance in Florida, but they can. That’s because disasters all over the world affect the cost of reinsurance for everyone. Reinsurance is “insurance for insurers”—a way for insurance companies to limit the extent of their own losses in case of disaster. The cost of reinsurance has been rising, and experts expect it to continue going up.
Skyrocketing construction and repair expenses. With the price of everything from car parts to lumber going up, it costs more than it did in past years to repair your vehicle or rebuild your house in case of a loss.
In addition, the value of vehicles and homes is also going up, which means in order for you to receive replacement cost in case of a loss, your insurance company will have to pay out more. It follows that if a covered item is worth more, then the cost of insuring it will be more.
Labor shortages are also affecting the price of construction, home, and auto repair.
(Read more about how supply chain issues and labor shortages are affecting car insurance premiums here.)
Lawsuits and fraud. For years, bad actors have exploited both policyholders and property insurers. Homeowners have been talked into filing claims and lawsuits by third parties like attorneys, contractors, or water remediation firms. Often times, homeowners don’t understand the claims process, or are relieved to have someone else take over. Unfortunately, every insurance consumer in Florida is paying the price for inflated or fraudulent claims and lawsuits.
Florida has, by far, the largest number of lawsuits related to homeowners insurance claims. For instance, in 2019, only 8.15 percent of all homeowners claims in the U.S. were filed in Florida, but more than 76 percent of property claim lawsuits were filed here. And what’s worse: only eight percent of the fifteen billion dollars that property insurance companies paid out in claims costs between 2013 and 2020 went to consumers. Seventy-one percent went to attorneys!
What can you do?
Much of what is happening in the insurance industry is out of individuals’ control, but here are three things you can do:
Review your insurance needs with a Lakewood Financial agent. We can help you make sure you have the appropriate coverage for your situation, and that you’re taking advantage of all discounts available to you. We can also discuss whether or not an option such as switching to a higher deductible to lower your insurance premium is right for you.
If you have a claim, be sure to contact your insurance agent and/or your insurance company yourself. Do not sign anything without talking to your insurance agent or directly to your insurance company.
Contact your elected officials and tell them that continued insurance reform is still needed. Though recent legislation has helped to reduce assignment of benefits lawsuits, other types of lawsuits are still going up, at a cost to all of us.
We at Lakewood Financial understand your worries and frustrations about the cost of home and auto insurance. We promise we will do the best we can under these difficult circumstances to provide you with the best coverage at the most cost-effective price. Please call us at 941-747-4600 if you need to discuss your insurance options. If you prefer, you may also contact us online.