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Florida has been facing insurance challenges for many years now.  Hurricanes, flooding, wind damage, and record claims.  Florida also had a massive increase in litigation costs regarding claims due to the 2017 State supreme court decision that allows courts to award attorneys up to 2.5 times their hourly rate should the court rule in favor of the policyholder.  Florida has more insurance lawsuits out of any state and lots of these claims/lawsuits are fraudulent.  Florida has recently passed new legislation to ease rising insurance costs and frivolous litigation.  The issue is Florida still must deal with flooding, hurricanes, and wind damage which are becoming more costly. 

California on the other hand deals with fires and flooding throughout the state.  The real big issue is Fires and the number of acres burned in CA has grown in recent years, leading to an increase in insurance losses.  If you are in a fire zone or buying in a fire zone getting insurance is becoming an issue and if you can get insurance, you will pay a major premium.

In both states, people are seeing policies 2,3,4 X + in cost and it is getting harder and harder to find a company that wants to insure properties.  These are 2 of the biggest states that seem to be facing more and more climate changes and that is resulting in extreme weather or fires that are putting lots of pressure on insurance companies to keep writing BIG checks to handle claims.

Legislation is also a BIG issue in both states.  Take California, in 1988 the state passed and approved Proposition 103 which allows the state insurance commissioner to reject proposed increases and order refunds to be paid to policyholders.  It has saved customers billions of dollars BUT it comes at a cost.  Insurance companies must go through a long process to raise rates and eventually, they just want to leave and exit the state.

Insurance companies are pulling out of many other states in the US, but Florida and California are the 2 biggest markets.  When you see major weather events causing massive damage in states; flooding, wind, tornados, and the list goes on you know insurance companies are at more of a risk of high payouts in those states so expect higher rates and fewer providers.

So, why are insurance companies NOT really raising prices or why are they pulling out of states?  Besides the government or laws in place that make it harder for insurance companies to raise prices and make it financially sustainable to stay in a state, there must be something else going on.  Have you ever heard of Reinsurer?  That is when a company provides financial protection to insurance companies.  Reinsurers handle the risk that is too large for insurance companies to handle on their own and make it possible for insurers to obtain more business than they would otherwise be able to.  So basically, we have insurance in case something major happens and it does NOT financially BK us, well that is Reinsurers to the insurance companies.  Reinsurance companies are raising the prices for insurance companies in many states due to high claims and if the insurance company cannot pass on that cost to consumers they cannot afford to stay in that state.

This problem is not going to be fixed overnight and with more and more claims in states due to weather or even fraud this is only going to make it harder for the consumer to get insurance or even afford the cost of insurance.  It will only make more companies leave states like FL and CA because they cannot afford to stay in these states due to their cost going up.  It does NOT seem like there is a solution here, the only solution is to hope for less severe weather or the local government in these states will have to allow the insurance companies to raise costs.  Will the federal or local state governments have to come up with their own insurance plans?

Homeowners and landlords that live in these states will have to live with higher insurance costs and fewer options for now.  My advice is if you have a policy coming up, don’t wait until the last minute to contact your insurance broker or company to make sure they are still writing policies, or give yourself time to shop around for the best rate.  If you are purchasing a property, talk to an insurance broker before you start writing offers to make sure the area you are buying in does NOT have inflated insurance costs or that it is even possible to get insurance.  Be proactive and plan ahead so you know the cost and factor that into your monthly budget.  This could make or break a deal for some homeowners or landlords.

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