George Gibbs Center for Economic Prosperity

Why Your Flor⁠i⁠da Proper⁠t⁠y Insurance ⁠i⁠s So H⁠i⁠gh

By: Sal Nuzzo / 2022

Sal Nuzzo


George Gibbs Center for Economic Prosperity


On July 21, 2022, Florida’s Office of Insurance Regulation sent letters to 17 property insurance companies in the state, downgrading their financial rating – a move that will have extraordinary impacts on the state’s homeowners’ insurance market. Despite the Governor and Legislature coming back for a special session in 2022 to address the property insurance crisis we face, the challenges appear to not only continue, but worsen.

“Florida’s Property Insurance Market in Crisis with No End in Sight.” “This is Not a Survivable Market.” “Florida homeowners pay nearly 3x national average for homeowners’ insurance.” Those are just three of a plethora of recent headlines outlining the challenges that are currently plaguing the homeowners’ insurance industry in Florida. Private firms are either going under or leaving the state altogether to avoid the inevitable collapse. In some cases, residents are being forced to sell the homes they have lived in for decades, because they can no longer afford the insurance premium payments. As a result, the state’s “insurer of last resort,” which functions as a taxpayer funded socialized insurance carrier, is ballooning to a size not seen in close to 20 years.

What’s going on? How did this come to happen? And what can we do to remedy the problem?

The issue is complex, and the reasons for the situation the Sunshine State currently faces are multi-faceted. Let’s look at three of them:

Geography: Florida is unique for many reasons, and among those are the fact that the state is a gigantic land mass jutting out into the middle of the most hurricane friendly area on the planet. Florida’s coastal risk is in the trillions, and dwarfs that of Louisiana, Virginia, Texas, North Carolina, South Carolina, Georgia, and Mississippi – combined. And it doesn’t matter if you live on the coast or off it – you’re in the mix. If you live within the border of Florida, you live less than 90 miles from the coast. When Hurricane Michael made landfall in 2019, locations in Georgia got hit with a Cat 3 storm.

Risk Pooling: For better or worse, people want to live on the coast. It’s a part of Florida’s brand. And with our geography what it is and such an immense amount of risk to mitigate, property insurance will inevitably be complicated. Consequently, Florida maintains an effectively socialized homeowners’ insurance organization – Citizens Property Insurance Corporation. Originally designed to assist homeowners who could not feasibly acquire property insurance in the private market, it was intended to be an “insurer of last resort.” While this concept makes sense in a state like ours, policy changes in the mid-2000’s distorted the market – pushing more and more homeowners into the state-run option and shrinking the private market immensely. This is important because ultimately, taxpayers are the ones on the hook if Citizens Property Insurance Corp. gets hit with a rash of claims from a bad storm year or two.

Frivolous litigation scams: Florida is home to roughly seven percent of the U.S. population, and about eight percent of all property insurance claims – but it also represents almost 80 percent of all property insurance litigation. This is a direct result of the way Florida’s lawsuit system functions. Our lawsuit system incentivizes fraud – it makes it easy for fraudulent contractors and bad-actor trial attorneys to partner together and file claims by the tens of thousands. Insurance companies, at a disadvantage in the court system, have no real option other than settling thousands of nuisance claims to avoid paying out massive legal costs (for BOTH sides of a lawsuit). Florida consistently ranks in the bottom five states in our litigation environment, with some economists estimating that a family of four pays roughly $2,500 a year in a lawsuit tax through increased costs.

This is just a high-level look at the issue – the drivers are wonky, in the weeds, and extraordinarily complex in unwinding. The three factors discussed above are just the tip of the iceberg, but sit at the core of what is driving a reckoning in our insurance market challenges.

Turning the tide is an issue of vital importance to Florida’s future prosperity – and it involves our policymakers, the insurance industry, and the trial bar addressing the root causes of the crisis, rather than attempting to put a band-aid on a gunshot wound. We need a functioning market – one with clear, concise, and consistent regulations that promote consumer choice, company accountability, and legal transparency.

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