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Finding Coverage in the Sunshine State
Florida has never been an easy or inexpensive market for homeowner’s insurance. But several developments have made it even tougher to secure coverage.
In 2007, Florida lawmakers imposed a rate freeze on the state-operated insurance company, Citizen’s Property Insurance Corporation. Citizen’s is the state’s largest insurer, and it has a high concentration of policies in the most hurricane-prone areas of the state. This rate freeze was the result of campaign promises to Floridians facing large rate increases after a rough hurricane season.
Entering the third year of the rate freeze in 2009, Citizen’s and the state-run Florida Hurricane Catastrophe Fund will be underfunded if this year sees an active hurricane season. Without the ability to close the funding gap, Citizen’s has changed the eligibility rules for coverage, making it harder for new customers to secure coverage and for existing customers to keep their policies.
Compounding the rate freeze is the fact that Florida has the second-largest list of foreclosed properties in the United States. Without occupancy and regular maintenance, these homes probably will suffer more damage in a hurricane than an owner-occupied home, thus increasing claims costs.
These conditions have led a number of insurers to curtail coverage availability or pull out of the state altogether. For example, on January 27 of this year, State Farm announced that it was exiting the Florida home insurance market, affecting the policies of 1.2 million customers. In July 2008, State Farm requested a 47.1% rate increase, which was denied by Florida’s Office of Insurance Regulation on January 12, 2009. As a result, State Farm joined Allstate, Westfield, Kemper, Metlife, St. Paul, Safeco, Royal, Hartford, Old Dominion, Hanover, Encompass, and Traveler’s on the list of insurance companies either withdrawing from Florida or placing moratoriums on new policies.
To combat this exodus of insurance companies, the State of Florida has provided low interest capitalization loans (i.e. taxpayer dollars) to encourage the formation of new insurance companies. But at the moment, with fewer companies to share the risk and no ability to increase rates, the remaining insurance companies can either exit the market like State Farm, or “ration” coverage.
If you are considering buying property in Florida, we can help you find insurance coverage, but placing the coverage will take longer because we have to dig deeper. As a result, be sure to give us plenty of lead time before you close on your property. And be prepared for higher prices and more-restrictive policies than you may be used to on your property outside the Sunshine State.
If you have any questions about finding coverage in Florida, please give us a call at 847-572-0800 or email me at email@example.com.