Data Viz | Environment | Income, Poverty and the Economy

Florida homeowners insurance in five graphs

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In the episode, they explain how the property insurance industry is struggling to survive — one expert described it as being held together by a piece of chewing gum.

In short, a mixture of the peninsula’s vulnerability to climate risk and a regulatory framework allowing significant fraud and litigation costs make it a place that most large insurance companies don’t want to do business. So smaller companies have stepped in to fill some of the void, but their risk isn’t as diversified, and they are more likely to shutter. 

For many Floridians, there are no insurers on the private market willing to sell a homeowners insurance policy, especially one that protects against wind damage. For these residents, as long as their home’s replacement value is less than $700,000 (or $1 million in Miami-Dade County), they can usually get insurance from Citizens Property Insurance Corp., a state-backed company. It is generally more expensive coverage, and not considered as high quality, but it will satisfy mortgage requirements for insurance. 

Use of Citizens for insurance was high in the early 2010s, but a series of policy changes to strengthen the private market led to many policies being transferred back to the private market. Now that trend has again reversed, and as private insurers go insolvent or leave the Florida market, Citizens is seeing policyholders come back in droves — especially in places where private companies think it’s too risky to write policies. 

Citizens is growing very quickly, but because it is under different regulatory controls from the private market, it can only raise rates so fast. Mark Friedlander, a spokesperson for the Insurance Information Institute, which is a research group funded by the insurance industry, says in the episode that their data shows private insurance has increased by an average of 33 percent this year. Citizens is capped by law at increasing premiums for consumers by 11 percent per year. So for example, if a house’s market value increases in one year by 20 percent, Citizens could still only increase the premium by 11 percent at the most. Rate increases are also subject to annual approval, and for many homeowners, this year’s rates will only increase by 6.4 percent. Citizens’ exposure is skyrocketing and, Friedlander says, the premiums are too low to cover their risk. 

The graph in this story showing premium costs over time illustrates this recent trend, including the difference in the past two years between Citizens and the private market. For Citizens, even though premiums have gone up for consumers the past couple of years, they are going down relative to the amount of exposed risk being taken on. In the private market, however, premiums have gone up even relative to the amount of exposed risk yearly since 2019.

If the Florida insurance situation is so precarious, why won’t Hurricane Ian sink the industry? Find out in How We Survive Episode 5.

How this ends is anyone’s guess. The state legislature has passed bills in recent years to try to improve regulations around fraud and liability. It’s too soon to say how much this year’s efforts worked. If enough private insurers fail, it’s possible that Citizens could entirely take over the hurricane wind market.  Or if people can’t get insurance, and thus can’t get mortgages, the housing market could collapse. Or, the industry will remain hanging on by a thread until a catastrophic storm hits in just the wrong spot, and the industry has to be bailed out by the government — and ultimately taxpayers. 

Another possibility is that people actually start to move out of high-priced Florida. Around six thousand people left Homestead, Florida, a town south of Miami, after it was devastated by Hurricane Andrew in 1992. But by the 2000 census, that loss was made up for, and since then the population has more than doubled, a trend that’s found throughout the state.

Severe weather can, of course, strike in other states too. Although hail is often cited as a reason for roof replacement in Florida, a AAA survey found that residents in several other states reported a higher rate of damage from hail. The risk of total, widespread destruction from hurricanes, however, is on a different level — and the insurance reflects it.

From hurricanes to tornadoes, Florida’s natural disasters wreak havoc for property owners. According to the 2022 AAA Consumer Pulse Survey, 45% of Floridians have faced damage to their homes and cars from hurricanes, and almost a third from flooding.

Insurance of last resort becomes insurance of first choice. As private insurers go insolvent or choose to leave the market, state-backed Citizens Property Insurance Corporation is often the only option available for homeowners insurance. Citizens has seen rapid growth in the last few years. 

Premiums for consumers are getting more expensive, although some experts say they are still not priced high enough to appropriately cover risk. Shown here are premiums collected by Citizens and private insurers, standardized by the value of the properties they are covering and displayed as a percentage. For example, on an individual level, an annual $4,000 premium on a house with $300,000 replacement value would be 1.3% by this metric. 

Citizens premiums are higher for the amount of exposure they are covering, which is not surprising given that Citizens often insures properties generally deemed too risky by private insurers. But in the last year, private insurance rates have increased faster than is allowed for the more regulated Citizens insurance. So, some consumers have found Citizens to have cheaper premiums than private offerings. 

And, while Citizens rates increased relative to its risk exposure from 2015 to 2020, in the last couple of years, that trend has reversed. Now, its exposure is rising faster than its growth in premiums.

Homestead, Florida took a direct hit from Hurricane Andrew. Census estimates suggest that the population of the town fell by 20 percent. But since then, the town has seen the rapid growth seen throughout Florida, with little sign of slowing down.

More Floridians report hurricane damage, but other states rival or exceed Florida with reports of damage from other severe weather and natural disasters. Survey respondents in both Florida and Colorado reported hail damage, but it was more widely reported in Colorado. In contrast, more respondents in Florida had damage from a wildfire than those in Colorado.