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What's Going On In The Homeowners Insurance World?

Allen McGinniss, 9.29.2022



Homeowners insurance rates have gone crazy. If you have only recently noticed, you’re one of the lucky ones. We’ve seen rates trending up, and up significantly since 2019 and at a completely insanely pace since 2021. 


Here’s the story. 


TLDR version:


The cost of paying claims is up, so the cost of policies are up. Roof fraud, roof replacement schemes, and abusive litigation practices (allowed by the Florida legislature - that has been dominated by the Florida Trial Bar), are the main driver of the increase over the past 3 years. 


Unfortunately, for those of us homeowners who maintain our homes, aren't interested in ‘soaking the insurance company’ and who just want to be protected if something bad happens, end up footing the bill to pay the unscrupulous homeowners, unscrupulous contractors, and unscrupulous attorneys.       


Here is the (super) long version:


Insurance is a simple business. Insurance companies have to bring in more money than they spend on expenses.
Money comes in from: 

  1. people buying insurance policies

  2. investment gains on money they hold to pay claims. 


MOST of the money comes from people buying policies. And in Florida, most homeowner companies aren't massive like the State Farm* group of companies, or Allstate Ins Group**, Farmers Ins Group***, Liberty Mutual****, etc. who can actually make a reasonable amount from their investments, because they have $20-80 billion dollars in written premiums. Most homeowners companies have surpluses in the $35-100 million range*1. Sounds huge, but when you consider that if four houses of $250,000 are totally destroyed… that’s $1 million dollars... a multi-million dollar surplus can go down pretty fast. 


*State Farm 2021 Annual Report

**AllState 2020 Annual Statement (page 3)

***Farmers Direct Insurance Company 2021 Annual Report (page 3)

****Liberty Mutual Group 2021 Earnings (page 17)

*1) American IntegrityOlympus; Florida Family; Frontline


Expenses are pretty simple too. Money goes out from:


  1. Cost of running the company (pay for adjusters, underwriters, agents, sending mail, complying with state regulators, etc)

  2. Cost of buying ‘Reinsurance’ (insurance against catastrophe so big your carrier cant afford it)

  3. Cost of total amount paid in claims and claims handling


The main issue for the recent rate increases is the 3rd point; massive increases in the total cost of handling and paying claims. Total dollars in claims payout has a direct impact on the cost of reinsurance. Because, reinsurance is simply: Money to pay claims above a specific threshold for an insurance company. And if those costs are up, the cost to provide the reinsurance is up too. 


The rest of this article will address that last part - the increase in cost of claims since 2016. 


One major driver of increase in claims costs are changes in the legal landscape in Florida since 2016, which have resulted in disproportionate increases in:

  1. the number of lawsuits filed against Florida insurance companies, 

  2. the costs to the insurance companies of handling those lawsuits

  3. the number of roof related claims being filed & litigated 


The number of lawsuits filed against FLORIDA insurance companies:

In 2019, Florida accounted for 8.16% of all homeowners claims within the US minus, NY and ND. In that same year, Florida accounted for 76.45% of all homeowners insurance lawsuits against insurance companies throughout the US (again, not counting NY or ND because they don’t participate in the study where this data came from).   


When I first read that number I thought, “Well, what if homeowners companies in Florida are just more aggressive in denying or closing claims without payment? Maybe you HAVE to sue in Florida because Florida insurance companies are greedy jerks and deny claims more than other states?”


Fortunately, the same study had that thought as well. In 2019, the percent of homeowners claims closed without payment (denied or under deductible) for Florida was 27.9% - right in line with the national average. Higher than 21 states and lower than 26 states.  


The costs to the insurance companies of handling those lawsuits:

On 02/24/2021 the Florida Office of Insurance regulation provided another report which showed how costs were going up.


The big takeaways are:

  • In 2016, there were 34,227 lawsuits against homeowners companies.

  • By 2018 there were 69,785, and 79,220 in 2020.

  • Hurricane claims and litigation have gone up significantly as well. In Q4 of 2017, the percentage of Homeowners hurricane claims closed that included a lawsuit was less than 1%. By Q1 of 2020, it had increased to 16%+. These two data points show the increase in litigation, and what multiplies that problem is that the average cost of a claim that is litigated is 300%-490% more expensive than a claim without a lawsuit. (page 5 of the Feb 2021report)


The number of roof related claims being filed:

Page 8 of the Feb 2021 report summarizes the roofing portion of the report by saying, “The data gathered generally reflects an increasing number of roof claims and related litigation between 2016 and 2020.”

This matches what I've seen in my own 17 years experience in the FL homeowners insurance market. The increase in the number of ‘hail’ claims or ‘wind’ claims that have been filed over the past 2-3 years are amazing. And, not surprisingly, almost none of those are on homes with roofs that are 12 years or newer. Almost ALL of them are for homes with standard shingle roofs that are 17+ years old or tile roofs that are 25+ years old.

And what’s interesting is, very rarely do we file an auto claim or other hail damage claim when filing a hail claim on an old roof. Somehow, the ‘hail’ that damaged the roof, did not damage anything else nearby, and somehow only damaged the roofs in the neighborhood with houses that were built 21 years ago (and now have 21 year old, builder grade, roofs). No damage to cars, boats, carports, screen enclosures, etc. 


I actually had an insured who filed a claim where they (the homeowner) were putting on an addition, and the roofer went up to replace the roof (they were replacing the entire roof at the same time as making the addition), and had the insured file a claim for wind damage - and they were given a brand new roof by the insurance company. 


Some roofers will go to people with worn out roofs that need to be replaced, and just tell them they have ‘wind/hail’ damage even if they don't, so they file a claim. The insurance carriers (because of how the current laws and judicial rulings are set) really can't defend themselves, and as a result pay for roofs where there has not actually been damage (more on why below). In some cases, roofers will offer to inspect your roof, and they’ll carry their ball-peen hammer up to the roof with them to help make sure they find damage. This actually happened to a close friend of mine who called me after it happened. And I've had many insureds who call and ask a similar question about someone knocking on their door offering to go and inspect their roof to see if their insurance company should “buy them a new one”. 


There was a Special Session of the Florida Legislature called in May 2022 specifically to deal with the insurance rate and stability issues in Florida. Some improvement was made to handle some of the abusive claims litigation practices which will help in the long run. Unfortunately, the main issue is that insurance companies are still being forced to write insurance policies, with replacement cost coverage on roofs, and required to offer those policies at a rate that causes them to lose money. 


The Florida Senate has attempted several times to pass legislation to allow carriers to offer cash value (depreciated) coverage on roofs, but it has been squashed in the Florida house by members/leaders with close ties to the Florida Trial Bar. 


Unfortunately, because of the Florida Legislature's unwillingness to curb the real root of the problem, roof replacement schemes, we will all continue to suffer from higher rates even if we have a newer house, newer roof, and never intend to file a claim for damage on something that was worn out in the first place. So, for now, the best thing we can suggest is to continue looking at your deductible options first and increasing to as high as you can afford to go. After that, we’re pretty much stuck to just checking to make sure all discounts are in place, and then removing or reducing other important coverages (which you probably wouldn't have purchased in the first place if they weren't important to begin with). 


Right now, there’s very little opportunity to move carriers.

Insurance companies do not want more policies right now. With several companies having failed over the last few months and the recent legislation prohibiting carriers from not writing a policy due to roof age, most carriers are not trying to expand. Because they are prohibited from using roof age as an underwriting/eligibility factor, many carriers will now only write homes that were built 2012 or newer. Several carriers have recently stopped writing ALL home or rental policies in Florida, regardless of how new, until further notice. 


8 Carriers have failed in the last 18 months:


  1. American Capital Assurance Corp, 04/14/2021 - (1,752 FL policies)

  2. Gulfstream Property & Casualty 07/28/2021 - (32,681 FL policies)

  3. St Johns Insurance 02/25/2022 -  (147,000 FL policies)

  4. Avatar Property & Casualty 03/14/2022  (40,000 FL policies)

  5. Lighthouse Property Insurance 04/05/2022  (27,000 FL policies)

  6. Southern Fidelity Property & Casualty 06/15/2022  (78,000 FL policies)

  7. Weston Insurance Company 08/04/2022

  8. FedNat Insurance Company 09/27/2022 


A few other carriers have recently had their ratings downgraded or withdrawn entirely, and others haven’t yet been affirmed by Demotech yet while others were affirmed as scheduled on 08/01/2022.

  • United P&C Insurance – downgraded two ratings from A to M (there is a ranking of S between A & M)

  • FedNat – rating withdrawn 08/03/2022; declared insolvent 09/27/2022

  • First Community Insurance Company – rating withdrawn 08/02/2022


Here’s additional data to help show in more detail what’s going on, plus some articles that do a better job of explaining some of the stuff I've probably missed. 


Progressive Insurance02/2022 - drops 56,000 homeowners with roofs over 15 years of age.

Federated National Insurance: - 05/2022 - drops 68,200 policies.

UPC Insurance01/01/2022 - stopped writing all new policies. 

Farm Bureau: 02/01/2022 - stopped writing all new home and rental property policies. 

Bankers Insurance: 07/29/2022 - left the state of FL completely.

Following is a list of some (not all) of the Cancellation/Nonrenewals approved by the Office of Insurance Regulation (OIR) since February 2020:


  • February 2020: Anchor (HCI Acquired 43,000 policies)

  • May 2020: Capitol Preferred (Cancellation of 23,800 policies)

  • February 2021: Weston (Cancellation of 1,500 wind-only policies)

  • April 2021: Southern Fidelity (Nonrenewal of 19,600 policies over 14 months)

  • May 2021: Gulfstream (Cancellation of 20,311 policies)

  • May 2021: Universal Insurance Company of North America (Cancellation of 13,294 policies)

  • Feb 2022: Progressive (non-renewal of 56,000 policies)

  • May 2022: FedNat (Cancellation of 56,500 policies)

  • May 2022: Maison (Cancellation of 3,300 policies)

  • May 2022: Monarch (Cancellation of 8,400 policies)


Additionally, many carriers have tightened up their guidelines to what they are offering to write or stopped offering to sell policies (which is how they make a living) all together.


  • Centauri Insurance - 06/15/2022 - stopped writing all new home and rental property policies. 

  • First Community Insurance Company - 06/15/2022 - stopped writing all new home and rental property policies. Then on 07/29/2022 announced they are withdrawing from the FL Homeowners market entirely and non-renewing their entire book of business. Rating withdrawn by Demotech Rating Agency on 08/03/2022.

  • Weston Insurance – 07/15/2022 - stopped writing all new home and rental property policies. Subsequently declared insolvent on 08/03/2022.

Many companies have limited eligibility by year built. Many are limiting year built to 2012 or even 2021 or newer.


I hope this has at least not put you to sleep, and maybe even helped you understand a bit about what’s going on. As far as what we can do to help fix the issue – unfortunately you’ll have to start with your state Senator and House Representative. Their action (and inaction), has caused this issue and it would be fixed by simply allowing carriers to write Cash Value (depreciated) coverage on roofs. Find your State House an State Senate Representative's information. Email/call and ask them to allow carriers to offer cash value roofs so we can get back to a semblance of normalcy on rates and options for coverage.


The good news… yes there is a little, sorry it took forever to get here… leadership within the Florida House of Representatives will change in November 2022. Once that happens, there is a real chance in passing legislation allowing carriers to sell Cash Value coverage on roofs without other strings attached that keep them from covering their costs. Once that happens, we should see a leveling off of the rate increases and a lot more stability. In order for rates to come down more significantly, additional and more nuanced changes will be needed which will likely take a lot longer. Allowing carriers to sell Cash Value Coverage on roofs is the first step in the right direction so additional legislation can continue to improve the FL Homeowners and property insurance market.  


If you have other suggestions, shoot me an email or give me a call or text. I’m all ears and happy to look at anything that would help fix the current crisis.

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