Here’s why Florida’s property insurance market is a dumpster fire

by | Apr 16, 2022

In recent weeks, pressure has mounted on lawmakers to do something – anything, really – about the rapidly deteriorating home insurance market in Florida. Homeowners across the state are getting policy cancellation notices in droves, forcing them to hunt desperately for any company that will ensure the house where they live. An easy solution to this growing problem, though, remains elusive.

But the first step toward solving a problem, as the saying goes, is to admit you have one.

On that front, Florida leaders, from Gov. Ron DeSantis to Senate President Wilton Simpson and House Speaker Chris Sprowls, have at least acknowledged that Florida has a crisis on its hands. It’s a crisis that has been hard to miss: six property and casualty insurance companies have become insolvent since 2017, and six others have taken drastic steps to reduce their exposure in Florida, with some pulling out of the state completely, others canceling their riskier Florida policies, while the rest have simply refused to take on new Florida customers.

Why are Florida insurers in such dire straights?

Big storms cause big problems

A combination of factors is to blame, starting with the simple and unavoidable fact that Florida is a gigantic peninsula jutting out into the warm, hurricane-friendly waters of the mid-Atlantic Ocean and Gulf of Mexico.

The state has gotten clobbered with its fair share of extremely devastating hurricanes since 2016: Hurricane Hermine trashed the state’s capital city and surrounding communities in 2016, followed almost immediately by Hurricane Matthew. And although Matthew technically missed landfall, it nevertheless brushed violently along the entire length of Florida’s east coast, close enough to cause significant damage to homes and businesses along 250 miles of some of Florida’s most expensive beachfront property.

The very next year, Hurricane Irma slammed into the Florida Keys and then took the absolute worst possible path, straight up the center of the state, engulfing vast swaths of residential areas in heavy rains and wind. To this day, it remains the most expensive storm in the history of the state, causing billions of dollars in wind and flood damage, and devastated citrus crops and other industries.

Then, in 2018, Hurricane Michael tried to wipe Mexico Beach off the map. The Category 5 storm tore a path of destruction 100-miles wide by 80-miles long through the heart of the state’s panhandle.

Hurricanes weren’t the extent of the damage, either. There are the tropical storms which bring heavy rain and damaging winds that other states experience far less frequently.

Those damages add up. A billion here, a billion there. Pretty soon we’re talking about real money.

The math doesn’t add up for Florida insurers

On average, insurance companies across the nation pay out an average of $100.70 on every $100 of premiums they take in. While that may sound like a financial loser for the insurance company, they actually make a profit because they invest those premiums before paying them out. Typically, insurance investments make about 7 percent, which is how the companies are able to stay in business and provide homeowners protection from catastrophic damage.

But compared to the rest of the country, Florida is a significant outlier. According to R Street Institute, in 2016-2019, the Florida homeowners insurance market reported a combined ratio of 117.5 percent. This means that for every hundred dollars of premium received, insurers paid $117.50 in losses and expenses. Florida insurers actually outperformed other insurers on the investment side, making about 9 percent, but that still means they ended up losing almost 9 percent overall for every homeowner they insured.

Soaring premiums haven’t kept pace with insurance company losses, and homeowners simply can’t afford much more. No wonder insurance companies are saying they’ve had enough of doing business in the Sunshine State.

The Citizens Insurance: a ticking time bomb

With so many insurers packing up and leaving customers in the lurch, homeowners are increasingly turning to the state’s so-called insurer of last resort: Citizens Insurance, which is subsidized by the state. In late March, Citizens President and CEO Barry Gilway reported that his company would likely have more than one million policies by the end of 2022, and Citizens is adding policies at a clip of 5,500 per week.

A single storm similar to Irma, that takes out a broad swath of residential areas, could cause a financial catastrophe for Florida. In order to manage that much exposure, Citizens is considering a massive 11 percent hike in premiums, but property owners in some areas of the state, like South Florida, would likely pay substantially higher rates than elsewhere.

The rate hikes could lead to their own financial problems for homeowners who simply can’t afford to pay their mortgage and a significant increase in insurance costs. With rising interest rates, Florida’s home market could cool off quick.

Litigation exacerbates the problem

With so many storms, a high number of insurance claims are bound to be filed. And inevitably, more claims means more litigation. But Florida remains an outlier there, too. According to National Association of Insurance Commissioners (NAIC) data mined by the Florida Office of Insurance Regulation, while Florida homeowners insurance claims accounted for just over 8% of all homeowners claims opened by U.S. insurers in 2019, homeowners insurance lawsuits in Florida accounted for more than 76% of all litigation against insurers nationwide.

Simply put, that’s insane, and it’s unsustainable.  Something’s got to give.

Fraud and abuse

From sinkholes fears to fake roof damage, to allegedly leaky pipes, there seems to be no shortage of ways bad actors can take advantage of the insurance system to make false or exaggerated claims to bilk policies and drive up costs for insurers and homeowners alike.

Nationally, experts estimate that more than $80 billion in fraudulent insurance payments are made annually. Given Florida’s outsized role in the insurance market, there’s little doubt that a good chunk of that number can be traced back here.

Among the most common fraud schemes: claims for wind damaged roofs after a hurricane, when only normal wear and tear is present. Last month, Florida CFO Jimmy Patronis announced the arrest of two men who were charged with nine counts of fraud in connection with this type of scheme.

Lawmakers have attempted to address the fraud issue in recent years but more can still be done.

Bottom Line

Lawmakers will need to consider a broad range of actions that seek to reduce litigation, cut costs, install stiffer penalties for fraudulent claims, bolster the resources for fraud investigation claims, and revamp Citizens Insurance so that Florida taxpayers are not on the hook after the next major storm.


  1. John P Michel

    Something really has to be done about this extremely difficult problem that all of Florida faces. I have confidence in Gov. DeSantis, that something will be done. Please don’t wait too long Gov.

    • Anonymous

      That is a lot of delusion in one post

  2. Anonymous

    This article is definitely written with bias toward insurance companies. The fact that your quoting “normal wear and tear” that’s a trick adjusters use all the time to deny claims after storms. That sends off multiple red lights when reading your article. Without litigation you give insurance companies a green light to deny claims at will. I’m not sure what the answer is to fixing the problem but I can tell you that without litigation consumers would have no recourse. The Department of Consumers Services cannot solve “Questions of Fact”.

  3. James W. Dougherty

    If an aged roof is damaged, it would seem common sense to allow insurers to pay only the current value of the repair and not pay for an entire new roof. I know many homeowners who game the current system by demanding a new roof and when the claim is denied get an attorney to file suit. The lawsuits consume carrier value & make the system unsustainable without increasing premiums. Meanwhile owners continue to reside under the old roof until the cash register rings. If 40% of a roof is damaged, the claim should be valued at 40% of the cost of a roof replacement, not 100% . If the entire roof is compromised, then it’s 100%. Compromise needs to be defined to restrict claims to actual loss.Roofing companies also play the system. A roof which costs 50k to replace in normal times becomes 100k after a major storm. This is nothing but price gouging. It is easy to attribute crass motives to insurers but the facts don’t lie. Leaving a large state like Florida to do business elsewhere is not window-dressing, and Citizens can’t pick up the slack. Insurers go insolvent for a reason. Receivers are generally appointed to liquidate the assets of insolvent companies & claims are paid out at pennies on the dollar. These are real situations which leave homeowners without options and foreclose the opportunity for spreading risk, putting more pressure on viable companies to consider leaving the state. If this trend continues homeowners will end up becoming self-insurers. This would be disastrous.

    • Anonymous

      That’s the difference between an actual cash value vs a replacement cost insurance policy.

  4. Nick

    I put a new roof on my house in 2016 for 17,000. My homeowner’s premium last year was $8000. I have zero sympathy for insurance companies. One thing that would help immensely is aid to make our homes more hurricane resistant. If Rick Scott would have put grant money out to upgrade houses instead of doling it out to scam artists to depopulate Citizen’s we might be in better shape today.

  5. b

    Hey, the same state that denies climate change is getting its due, how funny

    • Ray Gillie

      Hey in a few years the next generation won’t be able to do math – the insurance companies and contractors can get what ever they want.

  6. Anonymous


  7. Longjohn119

    You were warned over 20 years ago storms were going to get worse and worse because of Global Warming and that would drive insurance costs and losses higher and higher but you refused to listen and still refuse to TAKE RESPONSIBILITY for those mistakes

    Moral of this story: What goes around comes back around eventually and now you are paying the price for your politics and ignorance

  8. Anonymous

    Florida, it’s only going to get worse before it gets better. Insurance companies have been making money on their investments (stock market), rather than underwriting by writing property coverage in Florida. With the stock market the way it is, these same companies will record greater losses this year and will look at ways to increase premiums or reduce their exposure in Florida (leave the state all together). Maybe the Gov. can get Mickey Mouse to pay your premiums.

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