Florida’s insurance market is currently facing a crisis, with major insurance companies opting to leave the state. This exodus is largely attributed to the increasing risks associated with abusive litigation, and extreme weather events, particularly hurricanes, which are becoming more frequent and intense due to climate change.
Farmers Insurance’s Exit
Farmers Insurance, a significant player in the insurance industry, recently announced its decision to discontinue new coverage of auto, home, and umbrella policies in Florida1. This move is expected to impact around 100,000 policies1.
The company cites the need to “effectively manage risk exposure” as the primary reason for this decision1. However, it’s essential to note that only company-branded policies, which make up about 30% of the policies sold in Florida, will be affected1.
Policies sold by its subsidiaries, Foremost and Bristol West, will remain unaffected1.
The Larger Picture
Farmers Insurance is not the only company to make such a decision. In the past year, four major insurers have left the Florida market, with most pointing to the risks from hurricanes as the primary reason.
The increasing strength of hurricanes and the intensity of storms, exacerbated by climate change, are posing significant threats to the insurance market1. In 2022 alone, at least six insurance companies went insolvent in Florida1.
The Pensacola News Journal further elaborates on the crisis, noting that over 100,000 homeowners are now in a scramble to find new coverage in an industry that is becoming increasingly unfriendly to customers2.
The average annual property insurance premium in Florida has risen to more than $4,200, which is triple the national average1. This surge in premium rates is attributed to factors such as Florida leading the nation in homeowners’ insurance-related litigation and the state’s vulnerability to hurricanes2.
The Impact of Climate Change
A study led by researchers from the Pacific Northwest National Laboratory highlighted that climate change is intensifying hurricanes along the East and Gulf Coast2.
The research suggests that the frequency of hurricanes impacting the U.S. could increase by a third if current trends continue2.
The Impact of Abusive Litigation
Another factor that has contributed to the crisis is the high cost of litigation in Florida. Insurers are often sued by homeowners who claim that their insurance companies did not pay their claims fairly. These lawsuits can be very costly for insurers, and they can also lead to higher rates for all homeowners.
The Response from State Officials
Florida’s Chief Financial Officer, Jimmy Patronis, expressed his concerns about Farmers Insurance’s decision, emphasizing the need for accountability.
He also criticized the company’s focus on environmental, social, and governance policies, arguing that the emphasis should have been on policyholders1.“While the departure of major insurers like Farmers Insurance is concerning, it’s crucial for Floridians to stay informed and proactive. The insurance landscape is evolving, and as industry professionals, we’re committed to navigating these changes to best serve our clients.”, says Dustyn Shroff, Vice President of GreatFlorida Insurance.
Florida’s insurance crisis underscores the broader challenges posed by climate change, abusive litigation, and its impact on various sectors.
As the state grapples with the departure of major insurers, it’s crucial for policymakers, industry stakeholders, and residents to come together to find sustainable solutions.
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