Florida’s home insurance crisis could worsen as more companies downgrade

WEST PALM BEACH, Fla. — Since the Florida Legislature’s May session, little has changed in lowering homeowner’s insurance premiums.

Since January, up to 400,000 Florida homeowners have been denied coverage or received denial letters.

In addition, 275,000 homeowners had to find a new insurance carrier because their companies went bankrupt, unable to pay their debts.

This week, the Insurance Information Institute revealed that 27 more companies will receive downgrades from Demotech, an organization that rates insurance companies.

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That could expose more companies to the brink of bankruptcy, exacerbating what is being called Florida’s homeowners insurance crisis.

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Helen Krueger of Stuart, Fla., said she was “devastated” by the increase in the cost of her home insurance this year, even calling her provider to see if it was a mistake.

The Insurance Information Institute reports that Florida homeowners pay nearly three times more than the national average for annual property insurance premiums.

The institute noted that Florida homeowners pay an average of $4,321 a year, while the national average annual insurance premium is $1,544.

According to the Insurance Information Institute, the reasons are massive roofing fraud, dead-end lawsuits and rising home repair costs.

Citizens Insurance, a state-owned insurance company, is approaching the one million customer mark. Two years ago it was half as much.

Mark Friedlander of the Insurance Information Institute said the current model is unsustainable.

“It’s literally getting worse every day. The growth of citizens is completely out of control. An insurer of last resort, a government insurer of last resort should never be the primary choice for homeowners. It should strictly mean a last resort, a last chance opportunity. It’s not the first and only opportunity to get coverage,” Friedlander said.

RELATED: 17 Florida Homeowners Insurance Companies Could Face Downgrades

Insurance companies that write policies in Florida suffered more than $1 billion in losses last year.

The Insurance Information Institute said the problem of fraudulent roof replacements, repeated thousands of times, is exacerbating the problem.

In this process, contractors approach homeowners with an offer to replace the entire roof by first signing a concession letter.

This gives the contractor every right to negotiate with the insurer, leaving the homeowner out of the process.

These contractors then inflate the cost of replacing the roof by tens of thousands of dollars.

Insurance companies try to challenge this in court, spending thousands on lawyers and legal fees.

This happened so often that insurance companies started passing the cost on to homeowners in the form of higher annual premiums.

This has resulted in insurance companies turning away customers with roofs deemed old, some of which have years of service and durability left in them.

That’s one thing a state legislature can do decided at the May extraordinary session.

Homeowners can now get a roof inspection if the inspector can prove there is at least five years of use left; an insurance company cannot turn you down just because of your age.

Insurance agent Lee Wigglesworth, who serves Palm Beach County and the Treasure Coast, sees some insurers accepting these letters to successfully challenge non-renewal letters.

However, Wigglesworth said insurers are now looking at the age of the whole house as a potential reason not to accept new customers.

That could spell trouble for thousands of local customers who dropped service earlier this year and are looking for new coverage during hurricane season.

“Now that they’re not able to do that roof, we sometimes see that construction is outdated,” Wigglesworth said. “I just asked the staff what options we have for a full water, full hurricane in Palm Beach County based on the age of the building and they said 2010 or newer.”

For those who weren’t denied by their insurance company, budgeting around a significant premium jump was a challenge.

Helen Krueger of Stuart is on a fixed income. Her annual premium increased by almost $1,800.

“Well, I was stunned. I called the insurance company and asked them if it could be a mistake because I had no claims. I have Category 5 hurricane shutters on my entire house at all times. They won’t go anywhere, Kruger said.

A special state legislative session led to the launch of the Florida My Safe Home program.

If you qualify, free home inspections can identify some upgrades to your home. Eligible homeowners may also qualify for a windbreak retrofit grant.

To potentially save on your annual premium, homeowners should also review their declarations page and specifically the total replacement cost of their home.

Lowering this cost can reduce your annual premium by hundreds.

Plus, the initial cost of installing windows and garage doors will add up to years of savings.

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