Q&A – The Impact of Florida’s New Property Insurance Companies on Policy Prices
Each day I feature a listener question sent by one of these methods.
Email: brianmudd@iheartmedia.com
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Today’s Entry: Submitted via talkback asking about the potential impact of Florida’s new property insurance companies on the cost of policies.
Bottom Line: Last Wednesday Florida’s Office of Insurance Regulation approved eight new property insurance companies to begin underwriting new policies and to assume policies from Citizens. That approval brought the total number of property insurance companies that have either entered Florida’s property insurance market for the first time, or that have returned to it after having previously exited Florida, to 14 year-to-date. The short answer is that yes, there is and will continue to be price improvement in Florida’s property insurance market as a result of this progress. Generally speaking, each of the 14 new insurance companies represents the potential for a lower property insurance premium. Practically, it may not be that simple as not all of the property insurance companies may be underwriting in all parts of the state and for all property types and/or they may have already reached their risk threshold for taking on new policies. With that disclaimer out of the way let’s break down what you should know about the current phase of the Citizens policy depopulation, what your options are, and what all Floridians should consider doing before a property insurance renewal takes effect. Let’s start with the Citizens depopulation situation.
These are the guidelines for Citizens Property Insurance’s depopulation:
As noted by Citizens: If the policy you are offered has a premium within 20% of the estimated Citizens renewal premium, your insurance coverage will automatically begin with the new insurer at the end of your current Citizens policy term. If you receive multiple offers that meet this criteria, then you will need to select the company that offers the best coverage to fit your needs. This will ensure uninterrupted continuation of coverage.
And as for whether it’s a certainty that depopulated polices will mean higher rates... The short answer is not necessarily. While offers of not more than 20% or higher would make you ineligible for Citizens, recent history shows that premiums may not increase. Thousands of Citizens customers who received takeout offers were actually quoted a lower premium than the existing Citizens premium.
As more property insurance companies enter the market it becomes more likely that there will be enhanced competition for assumed policies which can create cost competitiveness in a market that desperately needs it. In the example presented in today’s Q&A it doesn’t sound as though you were presented with multiple options to select from and that you’re set to see an increase in cost up to the 20% threshold. Here’s what you need to know. That may not be your only option. Or even for those who are presented with multiple options – there may still be more options. If you’re being depopulated by Citizens, you’re not under an obligation to go with only the option or options you’re presented with. You have a right to shop around.
With so many new companies entering Florida’s market, if one private insurance company is interested in your policy, it’s possible if not likely that there are others. And that leads to my advice for all Floridians regardless of whether you have to make a forced carrier change or not. Shop around prior to your next policy renewal to see what the options are. While in many cases it’s possible to reach out to specific property insurance companies directly to see if they’ll extend coverage and at what cost, for most people the most efficient way to do this is through a property insurance broker. Once you identify the property insurance broker you’d like to work with, have them run your property with all available options to see what you find. You might be pleasantly surprised.
I was in a similar situation a decade ago – first being forced onto Citizen’s due to the Great Recession’s impact on Florida’s property insurance market and then in 2014 receiving a depopulation notice. I was set to be moved to a policy that was over $2,500 more than the Citizens policy. I reached out to an insurance broker and found multiple options had become available and found a policy with a South Florida insurer, that was about on par with the cost of the Citizens policy. With property insurance having become so expensive in recent years, a little due diligence annually is a good idea for most homeowners carrying property insurance. For that matter, with auto insurance having become so expensive as well, it’s a good idea to do the same there as well.