Florida's Insurance Crisis: Fraud, Litigation, and the Looming Market Collapse
Fraudulent Roof Schemes and Excessive Litigation Drive Up Costs
Florida's homeowners insurance market is teetering on the brink of collapse, largely due to rampant fraud and excessive litigation. The state has seen a surge in unnecessary roof replacements and aggressive legal claims, leading to a significant increase in insurance premiums. In 2022, the average annual cost for a Florida homeowners insurance policy is projected to reach $4,231, nearly three times the national average of $1,544.
Impact on Insurers and Policyholders
The combination of fraud and litigation has resulted in substantial net underwriting losses for Florida's homeowners insurers. Between 2016 and 2021, these insurers collectively incurred losses due to these factors. The situation has forced insurers to restrict new business, non-renew existing policies, and even cancel policies mid-term. Additionally, four homeowners insurance companies have been declared insolvent since February, further exacerbating the crisis.
State-Backed Insurance and Legislative Measures
Citizens Property Insurance Corp., Florida's state-backed insurer of last resort, has seen its policy count nearly double since 2019, reflecting the growing inability of homeowners to secure private insurance. To address the crisis, Florida lawmakers passed Senate Bill 2B in May 2022, aimed at reducing premium increases and curbing excessive litigation. However, the long-term viability of the insurance market remains uncertain, and continued vigilance against fraud and litigation is crucial.