Florida most expensive in nation for home insurance
Published: Tuesday, December 17, 2013 at 6:26 p.m.
Last Modified: Tuesday, December 17, 2013 at 6:26 p.m.
A new report ranks Florida as the most expensive state in the nation for home insurance, a dubious distinction that is straining homeowners' budgets and increasingly threatening the state's economy.
The average premium for a typical homeowners policy is $1,933 in Florida, according to the latest data released this week by the National Association of Insurance Commissioners.
That is four times the cost of a policy in Idaho, the cheapest state for homeowners insurance.
Homeowners insurance is now twice as expensive in Florida as the national average, raising concerns about what the trend means for the Sunshine State's future. Florida's reputation for low-cost living, a key driver in its growth for decades, could be challenged by steadily increasing property insurance rates.
"Having affordable homeowners insurance is critical," said Sarasota Realtor David Clapp, a managing broker with Re/Max Alliance Group.
The annual NAIC homeowners report compiles premium data from 2011, the most recent year for which numbers are available. The 2-year-old data almost certainly underestimate the extent of Florida's property insurance woes; rates have steadily risen since then.
Despite a hugely profitable year in which insurers again avoided paying hurricane claims, 69 percent of the rate requests submitted to state regulators through October where for increases.
Political leaders have started to question the state's lofty homeowners premiums.
Jeff Atwater, Florida's chief financial officer, recently asked state Insurance Commissioner Kevin McCarty to conduct an analysis of homeowners rates. The report was due this week but McCarty's office asked for an extension until Jan. 15.
Florida's latest ranking as the nation's most expensive homeowners insurance market is sure to add to the political debate, which could carry into the 2014 governor's race.
Democratic candidate Charlie Crist moved aggressively to hold down property insurance rates when he was in the governor's mansion. Republican Gov. Rick Scott has taken a more free-market approach, seeking to shrink state-run Citizens Property insurance and push more coverage to private companies.
This is the first year Citizens premiums are included in the NAIC calculation for average homeowners premiums in Florida. With the Citizens data added in, Florida's average premium for the most common type of homeowners policy leapt 25 percent, from $1,544 in 2010.
Some of that increase is attributable to rate hikes, but Citizens covers many of the state's riskiest properties and those policies tend to command higher premiums overall.
The addition of the Citizens data this year makes this NAIC homeowners report a more accurate tool for comparing premiums between states.
Because Citizens is such a large part of Florida's homeowners insurance market — nearly 20 percent — the absence of that data in past reports made it difficult to gauge where Florida stood in the rankings.
Texas previously had the largest average premium in the nation for a typical homeowners policy.
But Florida and Louisiana — which also had data from a state-run insurer added to the NAIC calculations for the first time — now rank above the Lone Star state.
The NAIC report warns that comparing insurance markets among states based on average premiums has limitations.
"Average premium is an imperfect measure of the relative ‘price' of insurance due to wide variations in hazards, economic conditions and real estate values from state to state," according to the report.
The addition of the Citizens data also makes it impossible to compare Florida's 2011 average premium with previous years and determine the impact of rate hikes on insurance premiums in Florida.
Most Florida homeowners need only look at their bills.
Despite spending his career in insurance sales in New England, Venice retiree Jim O'Connor said he was not prepared for the kind of market he would find in Florida.
Not only are premiums high, but O'Connor was dismayed to find so many small carriers with weak reserve funds.
O'Connor paid nearly $2,000 for coverage on his three-bedroom home when he first moved to the state. He has been able to lower the cost roughly 25 percent by putting hurricane shutters on the house and increasing his deductible.
But O'Connor is not confident his carrier will survive a strong hurricane.
"I don't have any real degree of confidence in the companies themselves and unfortunately I have none in the legislative process in the state," he said, adding that lawmakers should be forcing carriers to put more in reserves.
The unstable insurance market could have "a terrific" negative impact on the economy O'Connor said, noting that most of Florida's development is along the coast where premiums are increasing most rapidly. He pointed to the rising cost of flood insurance as especially concerning.
The large flood insurance rate increases recently approved by Congress are not even calculated into the NAIC data. Flood insurance is sold as a separate policy that can add thousands of dollars to homeowner premiums. Older, low-elevation homes in high risk flood zones are being targeted for the most dramatic rate hikes.
Clapp, the Sarasota Realtor, said Florida's real estate market has managed to absorb the rising cost of home insurance in recent years. People moving to the state have largely accepted higher insurance rates as the tradeoff for other benefits: A great climate, no state income tax, lower property taxes.
But there is a limit to what homeowners can afford.
"It is something that we need to watch and most definitely be as proactive as we can be to keep insurance costs under control," Clapp said.
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