Center for Property Rights

“Ba⁠t⁠⁠t⁠en⁠i⁠ng Down: Pol⁠i⁠cy Reforms ⁠t⁠o Avo⁠i⁠d a Flor⁠i⁠da Insurance Mel⁠t⁠down”


By Christian Cámara

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Florida’s pro-growth business environment, as well as its climate, low taxes, and position as the gateway to Latin America have encouraged the flow of people and capital into the state and created enviable levels of economic and population growth. In 2014 Florida surpassed New York to become the third-most-populous state in the nation, in 2018 it surpassed $1 trillion in GDP making it the 17th largest economy in the world, and earlier this year it was awarded an additional congressional seat following the 2020 Census that found a population growth of 14.6 percent over the last decade.

This growth has only accelerated in recent months due to the state’s aversion to onerous pandemic restrictions and lockdowns. Governor Ron DeSantis’ commitment to keeping the state open for business allowed Florida to weather many of the economic consequences of the pandemic relatively unscathed and led to the largest change in net move-ins of any state in 2020. By May of 2021, the state’s job vacancies were at pre-pandemic levels, the unemployment rate was returning to record lows, and salaries were climbing.  In September alone, Florida’s job growth rate was three times that of the national average and the state accounted for roughly 43 percent of all jobs created nationwide.

In the aggregate, this is all great news for Florida, but growth invariably brings growing pains. There are more cars, trucks, and accidents on increasingly congested roadways and more people and wealth concentrating predominantly in the state’s more desired coastal areas, which are more naturally prone to storms and flooding. Florida’s geographic position coupled with the aforementioned growth in population and economic activity has thus caused property and auto insurance rates to be costlier than in many other states.

Indeed, these are legitimate cost drivers that would justify some gradual rate escalation, especially when combined with modest reinsurance price increases after recent losses globally and this year’s inflation spikes domestically. However, the dramatic double-digit rate increases many Florida insurance consumers are experiencing disproportionately exceed many of these cost factors. Even worse, most Florida property insurers are reporting multiple years of net profit losses despite increasing their rates, confirming their inability to keep up with the costs driving their increasing premiums. As such, it is evident that the swelling price tags plaguing Florida consumers are being propelled by cost drivers disconnected from the economy, the state’s inherent risks, and other organic factors state lawmakers cannot directly control.

The good news is, Florida lawmakers know what is driving these massive rate increases and they can and have taken steps to address it in recent years. But more needs to be done.

With the Legislature poised to confront several new challenges, lawmakers will also need to grapple with this familiar issue yet again. The following report outlines how insurance rate increases have stemmed from behavior by stakeholders exploiting vulnerabilities in the law, the meaningful steps the Florida Legislature has taken in recent years to combat the abuse, and how it can build upon those reforms to stabilize the insurance market and hopefully promote more investment, competition, and lower rates for consumers.