top of page
Writer's pictureRealFacts Editorial Team

Storm clouds in the Sunshine State: Property insurance crisis is leaving Florida property owners in the rain


A flood in Florida

It appears that it is not always sunny in the Sunshine State. 


Despite it being a popular vacation spot, real estate investors always keep a wary eye on Florida, as its dark days are just as compelling as its sunny days. And in the sad case of many property investors and owners, the Florida real estate market faces very dark days ahead and for one, glaring reason: property insurance is in trouble.


There are essentially two reasons why Florida is currently in a property insurance crisis. The first is natural disasters. While natural disasters in Florida isn’t news by any stretch, what is alarming is the unprecedented uptick in their frequency. According to the National Centers for Environmental Information (NCEI), in the 1980s, Florida experienced about one disaster a year whose costs would exceed the billion-dollar mark. In the past five years alone, Florida averages four such disasters each year. Insurance companies are struggling to keep up with the flood of claims that the floods are figuratively bringing to their doorstep, and with the frequency of these costly disasters increasing, many companies have opted to withdraw from the Florida market altogether. Companies such as AAA and Farmers Insurance began limiting their risk by reducing or removing renewable policies in the state, and their reasoning is further validated by reason number two for the insurance crisis: litigation.


Newsweek reports that Florida is a natural breeding ground for home insurance lawsuits. A staggering 79% of the country’s home insurance lawsuits belong to Florida, and with Florida’s history of being a relatively litigation-friendly state, a disturbing number of these lawsuits are fraudulent in nature. The granular details of this process can be found here, but in broad strokes, roofing contractors would manipulate property owners and back their insurance companies into a corner, forcing the insurance companies to either pay the legal costs to contest the lawsuit or bend the knee and settle outside of court. These lawsuits are proving to be not only costly but more trouble than they are worth, and is another reason why insurance companies are leaving Florida property owners with little refuge from their literal and figurative storms.


With fewer insurance companies, reduced coverage, and limited renewability, property owners are dealing with painfully high premiums and nowhere to go. There has been a small glimmer of sunlight at the state level, where lawmakers have successfully mitigated some of the chinks in their legal system’s armor, making it more difficult for fraudulent insurance claims and lawsuits to make their way into court. Overall, the storm clouds continue to threaten the real estate horizon in Florida, suggesting that investment might not be wise until there are sunnier days ahead. 

Comments


bottom of page