The Brian Mudd Show

The Brian Mudd Show

There are two sides to stories and one side to facts. That's Brian's mantra and what drives him to get beyond the headlines.Full Bio


Q&A – How Florida’s Property Insurance Market Works (or doesn’t)

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Q&A – How Florida’s Property Insurance Market Works (or doesn’t as the case may be) 

Each day I feature a listener question sent by one of these methods.  


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Today’s Entry: Are the people in S. Florida subsidizing the homeowners insurance costs in N. Fla and the Panhandle? Are premiums about even? 

Bottom Line: The short answer to your question is no, at least not yet, though it’s possible. I’ll explain how that could happen – which also speaks to what needs to happen – to save Florida’s rapidly deteriorating property insurance market. In general, the three biggest factors which impact property insurance rates are... 

  1. Value of a property / potential cost of repairs  
  2. Geography  
  3. Reinsurance rates 

That’s true of pretty much every property insurance premium written anywhere in the country. Before diving in a bit deeper here’s how this all comes together. Property insurance rates ultimately are based on series of risk assessments coming together. The first of those risk assessments is the potential cost of restoring the property being insured in a catastrophic event. From that point there’s a risk assessment calculation made regarding the likelihood of everything from a complete restoration to a minor restoration. In Florida generally, but especially South Florida, we get dinged twice here. One that’s out of our control and another that’s specific to our code. As inflation has driven the cost of life higher – it's been especially brutal on building materials. To give you an idea of how big of an increase we’ve seen in just the past year... The average cost to build the average home anywhere USA was about $248k. Today, that number is $359k. Obviously – a huge increase which must be accounted for by insurance companies. But as you well know – there's nothing about South Florida property that’s typical. The cost of meeting Florida’s building code, which changed significantly after Hurricane Andrew in 1992, adds to the cost as well. To meet current building code, you can expect to add a minimum of $35 per square foot in cost to build/repair. And that takes us to geography.  

It doesn’t matter that Southeastern Florida hasn’t had a direct mass claim event since Hurricane Irma in 2017, or that we haven’t had a direct hurricane landfall since the record setting 04’-05’ hurricane cycle – which kicked off the previous Florida property insurance crisis. According to national property insurance risk assessments, Florida’s still far and away #1 for risk and where we live still has a top risk rating (not in a good way). To give you an idea about how dinged we are for our geography when property insurance is priced – according to the property insurance risk assessment, Florida’s not only the riskiest state to insure – no other is even close. Louisiana and Rhode Island are the two states closest to us and Florida’s 19% riskier to insure in compared to the 2nd highest risk state (and 4.7 times risker than the lowest risk state(s). As for reinsurance, I’ll not spend time dwelling on specifics pertaining to it, but it’s like this. Property insurance companies must have reinsurance to ensure they remain solvent and able to pay claims. As the cost of everything goes up, it does along with it for Florida insurance companies. And that takes us to the other two factors which weigh much heavier on Florida’s property insurance market than they should and it’s where reform is specifically needed. Claims history & litigation. 

As risky as it is for Florida’s property insurance companies with the threat of hurricanes and related severe weather - in recent years a threat every bit as big has been litigation. In demanding property insurance reform that’s desperately needed in our state, I’ve talked a lot about Florida having about 8% of the country’s property insurance policies but accounting for a stunning 76% of the lawsuits. Obviously, that’s absurd. But here’s another dynamic I’ve not discussed previously. Most of the litigation against property insurance companies isn’t based on claims related to an event. 60% of all lawsuits against Florida’s property insurers were based on claims which weren’t brought on by a mass claims event. Generally speaking, what we’re talking about are situations where homeowners need repairs – commonly roof repairs – and are filing insurance claims to attempt to have the insurers pay for regular maintenance. This creates a one-two punch of awfulness for other, more honest Floridians. It’s driving up the claim rates on properties around us – making our homes look risker to insure than they really are – and the cost of litigating the lawsuits is literally costing the industry over $3 billion dollars a year which is paid for by all property insurance holders statewide. What’s worse. Only 8% of that money went to property repairs. The biggest winners – the attorneys. 71% of all litigation money “recovered” has been going to attorneys. Basically, the entire Florida property insurance market is screwed – along with all policy holders – because slimy attorneys have been able to connect with less than honest homeowners to create a honeypot for the slimy attorneys.  

The result has been a net loss for the Florida property insurance industry for three consecutive years. That’s despite the already huge increase in premiums. It’s what’s led to numerous insurance companies failing, others lessening their exposure to Florida and the surge in Citizen's policies. And what does this mean to you specifically?  

  • The average Floridian pays $680 more for property insurance annually due to lawsuits 

So that’s the deal. And you asked if South Floridians were subsidizing the policies for other parts of the state... While the panhandle has historically (dating back to 1851) has had 17 more hurricanes make landfall than Southeast Florida, we’re in the same top risk pool. Policy premiums are generally more expensive in South Florida than northern Florida, because the homes themselves are generally more expensive to build/repair than those in northern Florida. With lawsuits currently being the bigger issue than mass claim events in our state, South Florida, led by Miami Dade, accounts for most of the property insurance lawsuits in the state by a wide margin. Policy holders across the state are having to account for many of the related expenses.  

All of this speaks to the importance of meaningful property insurance litigation reform in our state. The legal abuse of Florida’s property insurance market has proven to be far more devastating our property insurance market than any hurricane which has struck our state over the past decade.  

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