Compare Homeowners Insurance Rates
in just 2 minutes

Florida Homeowners Insurance Market Is Very Volatile

By Mike Heuer

When it comes to buying or selling Florida homeowners insurance, people who own homes as well as property and casualty insurers have found the state to be a very difficult one in which to do business. Affordable Florida home insurance can be very difficult to provide or find.

For most people with home insurance, Florida has a state-run discount insurer that underwrites the majority of policies, which makes it tough for traditional property and casualty insurance companies to make even a slim profit while underwriting coverage in the Sunshine State. The Florida Citizens Property Insurance Corp. is the largest provider of Florida home insurance plans with more than 1.22 million policies in force. But the insurer is looking to transfer at least 400,000 policies to up to 10 private insurance firms.

Because Florida is highly vulnerable to hurricanes, tropical storms, sink holes and many other perils, it is very difficult for insurers to underwrite coverage for homes and still make a profit with Florida homeowners insurance rates. State officials in 2002 created the Citizens Property Insurance Corp., which is a non-profit organization designed to give the Florida home insurance market an alternate source of property insurance coverage. But over the years, the state-run insurer has become the largest provider of Florida homeowners insurance while many private insurers have either exited the market or reduced their exposure.

State Farm officials recently announced intentions to stop underwriting Florida homeowners insurance rates in the state but since changed its intent after Florida lawmakers and insurance officials intervened due to concerns the Citizens Property Insurance Corp. would wind up taking on yet more home insurance plans. To alleviated problems, state officials now are working to create a Florida home insurance exchange and hope to reduce the number of properties insured through the Citizens Property Insurance Corp. by 240,000.

Studies show the cost of insuring a home in Florida has doubled from 2006 through 2012 and rates have gone up an average of 17 percent over the past 10 years even after the creation of the Citizens Property Insurance Corp. The proposed Florida home insurance exchange might help alleviate the costs, and state officials are concerned the next big storm to strike Florida could wipe out any reserves the Citizens Property Insurance Corp. has to cover its claims. A broke state-run insurance providers likely would result in the creation of a tax levy or other revenue-generating scheme to cover property insurance claims.

Another problem facing underwriters of home insurance, Florida has one of the largest foreclosure rates in the nation. As a result, many consumers do not maintain home insurance on their foreclosed homes, so the state forces policies on them to protect mortgage companies. With such a high rate of forced home insurance, Florida officials are looking for alternative sources of property insurance, such as the proposed insurance exchange that might go live in 2014..

If the new exchange is approved, it might become active in 2014, and state officials hope to have as many as 15 home insurers participate. But the next big storm to hit Florida could prove to be more than any insurer can handle, and that makes Florida one of the most volatile states for homeowners insurance firms and their customers.