Florida’s Home Insurance Crisis Isn’t Going Away

Florida’s Republican leadership has tried to play down the recent departures as a blip, arguing that the industry is stable and that Citizens’ growth is temporary. The state’s chief financial officer, Jimmy Patronis, called Farmers “the Bud Light of insurance” in what appeared to be an attempt to suggest that its decision was politically motivated. Governor Ron DeSantis, meanwhile, insists that the market is on the mend thanks to recent reforms: Last year, the Florida legislature cracked down on fraudulent litigation and created a new fund to help companies buy reinsurance, which experts believe will stall further bankruptcies. 

“It’s hopefully optimistic, but I think it still will take a long time,” said Palazola. “I haven’t heard any [insurers] say, ‘Oh, they put these reforms in place, that’s great, we’re all in.’ I’ve heard them say, ‘Let’s wait and see.’” Litigation has started to decline since last year’s reforms took effect, and if the trend continues some companies may come back to the market, but no one’s sure how well the new laws are working.

Even if Florida avoids a total market collapse, insurance prices are going to remain high, and that’s thanks in large part to climate change. Rapidly intensifying hurricanes like Ian are so large and so powerful that even healthy insurance companies have a hard time dealing with them, and many resort to fraud and deception rather than pay out all their claims. A Washington Post investigation found that several companies cut payments below required levels, leaving victims short on cash when they needed it most. 

Even during quiet seasons, the mere threat of a hurricane will keep prices high. In preparation for hurricane season, insurance companies buy reinsurance policies that can help them survive the cost burden of big storms, and those policies are getting more expensive: In the months after Hurricane Ian, multinational reinsurers raised prices by as much as 50 percent. 

Local companies in Florida are passing those costs onto their customers, who open their bills each year to find that their premiums are ticking higher. To make matters worse, many insurance policies aren’t sufficient to recover from storms. In Cape Coral, which bore the brunt of Hurricane Ian’s winds last year, many victims have found their insurance payouts are so small they can’t afford to rebuild their homes.

Homeowners won’t see much relief any time soon, according to Palazola.

“In a middle-of-the-road scenario where the reforms work and there’s an average hurricane season, I could see a scenario where prices don’t go up dramatically from here,” he told Grist. “You’ve got an extreme scenario where we have a giant hurricane this year, and the reforms don’t work, you have more large insurers leaving, and the price becomes untenable, to the point where the average person feels it.”

Something similar is happening in other states that are vulnerable to climate disaster. In Louisiana, which has seen at least four major storms in the last few years, several private companies have collapsed since 2021’s Hurricane Ida, forcing more customers onto the state-backed plan. And multiple national insurers have fled California in recent weeks rather than try to make a profit selling policies in the state’s wildfire-prone mountains. There, too, homeowners have rushed to buy coverage from a state-backed insurer of last resort. In both of these states, prices have soared as natural disasters continue to strike.

If Hurricane Ian sent a big price shock through an unstable market, another storm this summer could deliver an even bigger blow, pushing more insurers away and forcing more Floridians into the Citizens program. Industry leaders and top government officials insist that the state’s market could survive such an event without total collapse, but another storm would raise prices even further for millions of homeowners across the state. Not only would reinsurers push costs higher to account for the storm risk, but the state government would likely have to charge a tax assessment to keep Citizens afloat.

In other words, no matter how well the legislature clamps down on fraud, the mounting toll of climate change is going to make Florida a less affordable place to live. Even on a sunny day, the status quo is expensive.

Jake Bittle is a free-lance reporter. This story was originally published by Grist. You can subscribe to its weekly newsletter here.