JACKSONVILLE, Fla. — Since 2010, Florida has grown at a rate of about 300,000 new residents a year, according to the U.S. Census. Many of these new residents haven’t considered the state's reinsurance market. That's where insurance companies go to share risk, according to a September 2020 Bloomberg Businessweek article.
The article predicts that the peculiar dynamics of the reinsurance market has put Florida on the cusp of an insurance disaster making premiums for homeowners’ skyrocket.
Many Floridians are seeing those rates becoming very, very expensive right now.
There are three primary reasons this is occurring, according to Shaun Murphy of Jacksonville-based Pablo Beach Insurance Group.
Why are my rates going up?
Reason No. 1: There wasn’t rate adequacy, which means Florida’s growing housing market was flooded with carriers with low rates, Murphy stated in a YouTube video. The new low price-point carriers never experienced a storm which drove prices down. The state went about 11 years without a storm and then – boom – Hurricanes Matthew, Irma and Michael, 2016, 2017, 2018 respectively. Each of these devastating storms were Category 5 at one point.
Reason No. 2: A term called Assignment of Benefits (AOB). That's when someone takes control of a property or claim - a contractor or an attorney. A regular roof that’s $10,000 to replace is inflated to $30,000. “It’s fraud, folks,” Murphy said in the video.
Reason No. 3: Reinsurance rates. “They (insurance companies) are insuring carriers to make sure they can pay claims when a catastrophic event happens to make sure we’re all whole,” Murphy said. “The problem is it’s all hitting at one time. Rates are going up,” he said adding, “you’re probably going to get another ding next year around the same amount.”
After being in the business for more than 30 years, Murphy said he’s never seen anything like this.
The Bloomberg Businessweek article sums it up this way: "BOTTOM LINE - Thanks to the vagaries of the reinsurance market and a 10-year no-hurricane streak, Floridians enjoyed cheap homeowners insurance. No more."
