Bad news for Florida homeowners: high insurance premiums unlikely to drop any time soon

Floridians suffering from sky-high homeowners insurance premiums might have to face a new reality that their premiums won’t go down in the foreseeable future.

Despite years of reforms by Gov. Ron DeSantis and the Legislature, insurance experts and analysts are now saying they don’t expect to see premiums falling any time soon.

“Unfortunately, in our opinion, we don’t see a path to lower rates right now,” said Mark Friedlander, spokesperson for the Insurance Information Institute, which is backed by insurance companies.

On Monday, analysts with Karen Clark & Co., a catastrophe modeling firm, issued a five-page report that concluded “it is unlikely these costs will go down.”

Those conclusions are unwelcome news for Floridians, whose homeowners insurance premiums are the highest in the nation — and rising.

It’s also an indication that recent legislation might not bring the relief that homeowners need.

DeSantis, lawmakers and insurance companies have blamed “excessive,” “abusive” or “fraudulent” litigation for Floridians’ rising premiums, and curbing those lawsuits has been their primary response to the state’s insurance crisis. It’s now more difficult and more expensive to sue an insurance company.

Unlike their response to the last insurance crisis in 2007, the Legislature did not make lowering premiums the goal of the recent reforms. Instead, the stated goal was to stabilize the state’s insurance market, and DeSantis and state lawmakers have urged patience while waiting to see the reforms lead to lower rates.

The reforms have stabilized the market, said Sen. Jim Boyd, R-Bradenton, an insurance broker who is chairperson of the Senate’s Banking and Insurance Committee.

State regulators have approved new insurance companies to enter Florida’s market. Others are forming, and although companies like Farmers and Progressive recently announced plans to leave or reduce policies in the state, no companies have gone insolvent since February.

“I think, really, the indicators are pointing in the right way, but it’s going to take some time,” Boyd said.

Office of Insurance Regulation Commissioner Mike Yaworsky said “we’re seeing improvement across the board.” He dismissed “prognostications” of continued high premiums, saying they were being made by “people that are making money off of one or more aspects of the property insurance market.”

But when pressed, he didn’t say when Floridians could see lower premiums.

Over the last two decades, state lawmakers have responded when insurance companies complained of sinkhole claims, abuses in other types of claims and litigation, noted Sen. Bobby Powell, D-West Palm Beach.

“Every year it’s something new,” Powell said.

He said he’s heard from other legislators that the changes could take five or six years to be realized. He lamented that the Legislature isn’t considering other ideas to reduce rates, such as capping rate increases.

“People don’t have five or six years,” Powell said. “People are suffering now.”

Other factors driving up rates

Experts say that other factors beyond the Legislature’s control will keep rates from falling.

The cost of repairing or replacing damage to a home increased 55% between 2019 and 2022, for example, Friedlander said.

Florida-based insurers, which cover about four out of every five policies in the state, are also highly dependent on reinsurance, which they purchase to help pay out storm claims each year. The cost of reinsurance has increased dramatically in recent years, including 27% this year on average, according to the state’s Office of Insurance Regulation.

“That’s going to be a pass-along cost to consumers,” Friedlander said.

Had state lawmakers and DeSantis not made it more expensive to sue insurance companies, “we could have seen the failure of dozens of Florida domestic insurers,” he said.

The analysis by Karen Clark & Co. also cited climate change. Global warming is creating more severe hurricanes, the report states, and warming waters in the Gulf of Mexico are causing Florida to experience higher-than-usual losses from hail, tornadoes and wind.

“These factors will continue to influence future homeowners premiums, and it is unlikely these costs will go down,” the report states.

In May, Tallahassee lobbyist Fred Karlinsky, who represents numerous Florida-based insurers, told the ratings agency AM Best during a panel that he was also pessimistic about falling rates.

“I think it’s going to be a while, if ever, until we see that,” he said.

He cited one simple reason: Home values keep going up, making them more expensive to insure.

The more than 1.3 million Floridians covered by state-run Citizens Property Insurance policies could also see big rate increases in upcoming years.

As the insurance market improves, more companies will offer policies to Citizens customers. If those companies’ rates are within 20% of what the policyholder is paying with Citizens, those Floridians are forced to accept the private offer or leave Citizens.

Citizens’ rates will get more expensive, too. In 2021, lawmakers allowed Citizens to impose up to 15% rate increases on policyholders starting in 2026. Citizens’ president and CEO, Tim Cerio, said Thursday that he believes that rate cap should be eliminated, although the decision is ultimately up to the Legislature.

Currently, Citizens’ rates are 30-40% below private carriers, making them unable to compete, Cerio said.

“I think it’s hampering the recovery of the entire market,” Cerio said Tuesday.