What should you do if your home insurer pulls out of Florida?
Here are some helpful steps to help you take action should you receive notice that your insurance policy is being canceled.
- Call your insurance company. Speak to a representative or agent and find out the reason for the cancelation. Find out how long you have to get new coverage. A company going out of business vs. one pulling out of the state may have different timelines.
- Start getting quotes. It’s important to start gathering new quotes right away. Many other Florida homeowners are in the same situation, all trying to get new coverage at once. To make sure you have time to choose the best policy, start looking immediately.
- Complete any repairs. Finding new coverage will be easier if your house is in good condition. Florida home insurance companies will also look at any weather-proofing work you have done.
- Consider getting help. If you think you’re being treated unfairly or are struggling to get new coverage, contact the Florida Department of Insurance Regulation. Home (floir.com) They can also be of assistance in helping you find new coverage.
What happens if your insurance carrier goes under? Many people never consider this as a possibility, but as more and more insurance carriers go insolvent in Florida, this is becoming a very common reality.
- An unprecedented number of home insurance companies have pulled out of Florida or gone out of business in 2022.
- Policyholders often have only 30 days to get new coverage, leaving agents and homeowners scrambling to find a policy.
- New legislation to bolster reinsurance companies and reduce the cost of lawsuits has yet to impact the home insurance crisis in Florida.
In Florida since 2018, seven Florida insurers have gone insolvent, including three in just this year. The three ordered into liquidation so far this year have been Lighthouse Property Insurance Corporation, Avatar Property Insurance, and St. John’s Insurance Company. FedNat, in an attempt to restructure, even announced the cancellation of 68,000 of their policies. “The fact there are now several Florida insurers failing each year at a time when the state has been spared from landfalling hurricanes should be a cause for alarm.”
So if your insurance company does go under, what happens next?
When insurance companies go under, the Florida Guaranty Association (“FIGA”) takes over. FIGA is a statutorily-created and state-based system that pays certain FIGA proceeds to handle any claims or payments from those liquidated or insolvent insurance companies.
By going to FIGA’s website and their section on Insolvencies, you can see not only what insurance companies have become insolvent but also their liquidation date, the receiver for the company, and important claim deadlines, among other information.8 It is important to know your claims filing deadline if you find yourself in this situation.
So what outstanding claims get paid by FIGA? Guaranty associations provide coverage according to the insurance policy or state law. FIGA will process and pay for covered claims.
FIGA statute F.S. 631.54 defines a covered claim as “. . . ‘Covered claim’ means an unpaid claim, including one of unearned premiums, which arises out of, and is within the coverage, and not in excess of, the applicable limits of an insurance policy . . . .There are also certain claims FIGA will not pay for, such as non-policy claims, claims of self-insured groups, or other exempted entities from the guaranty association system.
There are limits, though, on what FIGA will pay. FIGA’s cap is at $300,000 with further limits on homeowners claims with damage to structure and contents, and condominium and homeowners associations claims. Homeowners’ claims with damage to structure and contents are capped by FIGA at an additional $200,000. Claims from condominium and homeowner associations are capped at the lesser of $200,000 multiplied by the number of units in the association or policy limits.
With the current reality of many insurance companies in Florida going under, it is important to be informed about what this could mean for you, your policy, and your claims.
For more information on finding out the status of a claim, next steps, and information on getting a new insurance policy, check out the Frequently Asked Questions Page on FIGA’s website: https://figafacts.com/frequently-asked-questions/
Why are home insurers pulling out of Florida?
In June, Southern Fidelity was ordered into liquidation, causing some 80,000 Florida homeowners to scramble for new home insurance coverage. In early August, Weston Property & Casualty Insurance of Coral Cables was placed into receivership, forcing the company to cancel all policies effective Sept. 7, 2022, and in late August, United Insurance Holdings Corp. (UPC) announced it had filed plans to pull out of the Florida, Louisiana and Texas markets.
UPC had just over 200,000 policies in force in Florida according to its last Annual Report.
On September 23, 2022, FedNat followed other companies into insolvency just ahead of the onslaught of Hurricane Ian, a few months after reducing it's business in the state due to financial trouble.
The reasons behind the home insurance crisis in Florida are complicated, but several key factors have a big impact.
No. 1 is the impact of soaring litigation costs. The Insurance Information Institute (III) published a brief on the Florida insurance crisis in August. It noted that a 2017 State Supreme Court decision allows courts to award a plaintiff's attorneys 2-2.5 times their hourly billing rate when courts rule in favor of policyholders. The result is more lawsuits; Florida is on pace to have more than 130,000 property policy suits filed this year.
In fact, III says Florida accounts for 79% of insurance lawsuits filed, with only 21% in the rest of the country.
A second but related factor is the increasing number of reinsurers who have chosen to retreat from the state in the face of rising litigation. UPC CEO Dan Sneed says this was the key factor in his company’s decision to leave the market.
“Due to significant uncertainty around the future of reinsurance for our personal lines business, I believe placing United P&C into an orderly run-off is prudent and necessary to protect the Company and its policyholders,” he says.
Further contributing factors include the fact that the Florida market is home to several smaller insurers who rely heavily on reinsurers and the booming housing market along coastal counties, which are more prone to flooding and hurricanes. Although the past three hurricane seasons have not been a significant factor, hurricanes in the past have been costly. III has said the insurance payout for Hurricane Andrew, which hit Florida in August 1992, was $15.5 billion at the time
The bottom line? Florida homeowners are projected to pay an average of more than $4,000 in the near future, nearly three times the U.S. average, according to III.