Homeowners Insurance: A Case for Optimism

By: Butch Swank

I believe the home insurance market is healing. In 2020, when it became apparent that the home insurance market was in dire trouble, our agency took great pains to inform our homeowner clients what we saw coming down the pike. In short, we said these roofing lawsuits are beginning to really hurt the carriers, and we anticipate large rate increases coming. We were right. Keep in mind that, around 2020, the average Florida homeowner paid $1800 annually. In 2024, that number is $6000. Those initial conversations were hard but necessary. We wanted clients to understand the big picture and not think the carrier was picking on them. It is very reasonable to think: “I’ve never made a claim. I pay my bills on time. Why are they doing this to me?” I get it, but it had nothing to do with you personally. The reason was the insurance carriers were being sued into oblivion. Now, after a year of diligently informing our clients what was happening, an interesting (and depressing) shift occurred. We still expected clients to be upset about their ever-higher renewal price, but instead, we started hearing: “I’m just glad I got renewed.” At that point, they’d also heard from neighbors or on the news how people were getting dropped or, yet another carrier was being shuttered. State law requires insurance carriers to retain at least $10,000,000 in reserves to remain in business. Once it drops below that number, the State must step in and place them in receivership. There are zero exceptions made. Carriers were mainly lost because they could not raise rates fast enough to bring in enough funds to compensate for all the money being paid out to lawyers. On the one hand, I was proud that our agency invested time with clients so they knew the hows and why. On the other hand, I got mad. This was wrong, so we began to explain to clients that, in our professional opinion, it was time to ride their particular State legislators like rented mules until things got fixed. After all, sitting back and moping is just not how a Florida man rolls!

For some context, around 2018, the Florida Legislature changed how lawsuits could be brought against home insurance carriers. The change allowed attorneys to charge triple their standard rate and put the responsibility on the carriers for paying their legal fees AND the fees of the person suing them. Then, the lawyers began to work with roofing contractors directly. The roofers would pay someone to knock on doors and say, “I noticed some shingles that look off; if you sign here on my iPad, we can get you a new roof for free.” Sounds like a great deal, right? Also, keep in mind that there was zero risk for the homeowner filing a lawsuit since it was all perfectly legal due to the new legislation. These legal tactics were relics from the civil rights era. It was initially intended to reward a black person back in the ’60s who could not find an attorney willing to represent them. It was meant to reward the attorney willing to step up and do what’s right by paying them triple their standard rate. It was well-intentioned then, and it worked. However, resurrecting that policy to fight home carriers was by no means well-intentioned and only worked in doing three things: enriching attorneys, driving Florida-based home carriers out of business, and raising rates tremendously. One more data point to finish painting the picture: In 2022, across all of America, Florida accounted for just 9% of all home insurance claims but had 79% of the lawsuits nationwide. That is not a capitalistic marketplace anymore. The existing companies could barely survive in that environment, and there were darn sure no companies willing to enter Florida’s market then, either.

Insurance carriers can make financial models against hurricanes and fires, allowing them to price a home’s insurance rate appropriately. But, they cannot model an unfair legal process that changes a roof claim of $30,000 to $130,000. At its peak, one home carrier I spoke with was getting twenty lawsuits per day—per day! It’s no wonder we lost six home carriers, and it’s a miracle we didn’t lose more. It’s also no surprise the ones that survived had to raise rates incredibly high to remain in business.

Enter the good news. Our agency has had to place almost all home clients with Florida-backed carrier Citizens for the past four years. Nowadays, only about a third of them go with Citizens. What changed? For years, it seemed our Florida legislators only did what was best for attorneys. Thankfully, that has changed over the past couple of years. Our legislators really worked to understand why the home insurance market was broken and then took concrete steps to fix it. It took a while, but I’m beginning to see they genuinely delivered. Here’s some objective truth for you: Heritage is a Florida-based and publicly traded home insurance carrier. That means their finances are publicly available to anyone. I did some research and have four years of their financial records for you: In 2020, they made $10.8 million. In 2021, they lost $68.1 million. In 2022, it gets even scarier – they lost $157.4 million. In 2023, Woohoo, they made $63.2 million. According to my calculator, they lost $151 million over the past four years. But they did make a hefty $63 million last year, and that’s being noticed by big companies nationwide. As proof, eight new insurance carriers have come to Florida in 2024 alone, with more actively working to re-enter our market. Capitalism is returning to full strength in the Florida market, which should be good news for everyone.

To be fair, I have seen some scary forecasts for the hurricane season, so let’s take that info with a grain of salt. Barring some Hurricane Ian-level, or worse, storms hitting Florida over the next one or two years, I think the rates have largely peaked and will slowly begin to come down. I didn’t go to business school, but I do know that a great way to compete in business is by offering a similar product at a lower price. A lower home insurance rate? That sounds delightful. The prices are sky-high now, and they have lots of room to come down. It won’t be fast, but I do believe that’s what is coming and why I am so optimistic about where our Florida home insurance market is heading. 

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