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Florida's Real Estate Challenge: Home Insurance Costs Rising (Part 2)

florida real estate homeowner policy homeownership insurance rising costs Feb 25, 2024
lawyer florida homeowner insurance

This week, we're continuing our series going in-depth on the biggest challenge facing the Florida real estate market: rising homeowner insurance costs. 😨

If you missed part 1, check it out here. 

Last week, I went in detail on how costs are changing throughout the state - helping us quantify the challenge. πŸ“ˆ

This week, we'll examine why the cost increases are happening.

In most cases, your clients just need to understand why something is happening and then they can make educated decisions and take action. πŸ’‘


Why are insurance premiums rising?


Based on data from Florida's Office of Insurance Regulation, one of the primary reasons insurance premiums are higher is because of the increased level of litigation against insurance carriers.

The top chart shows the % of national claims we account for in Florida (green bar).

Given our exposure to hurricanes, it's not surprising that we account for a bit more of the insurance claims compared to our portion of the nation's population. 

The red bar indicates that we are accounting for nearly 75% of all lawsuits against insurance carriers. 🀯

That's no bueno for the insurance companies given the cost to defend the lawsuits (blue bars at the bottom).

Keep in mind, those are just the legal costs and don't count the costs associated with repair and replacement on the claims.

Overall, it's lead to insurance carriers leaving the state in order to become profitable again. πŸ‘‹


Are hurricanes impacting insurance?

Outside of litigation, we should also examine if hurricanes have impacted the state and insurance carriers.

Take a look at the table below to see a historical list of named hurricanes that impacted Florida (recent storms in blue):


I was completely surprised to see a 12 year gap between Wilma and Irma (2005 to 2017). 😲

It's felt like having a hurricane every year was a normal thing.

After looking at the data, we can see that it's not typical to have frequent hurricanes.

There's only been hurricanes in 6 of the last 23 years. πŸŒͺ️

While the insurance carriers should have had a chance to build up reserves, they likely weren't planning on as many storms in such a short time span.

Check out the cost of the storms. We've had two of the most costly storms (by a long-shot) in the past few years.

That's also hard to plan for considering Irma and Ian were 3x and 4x the cost of the most expensive storm to that point. πŸ’΅


Finding Opportunity  


It's important we get an understanding of the "why" behind changes.

As a mortgage banker, I would talk to people who were totally freaked out about the market.

They'd want to back out of accomplishing their goals because they would go down a slippery slope and were worried they'd be in financial ruin if they bought the house before a market crash.

Many people have that exact same fear today. 😱

Rather than telling them what the future would hold, I was able to explain a few of the big drivers in the market and why I personally was optimistic about the market.

They felt comfortable enough to keep going and didn't throw in the towel. πŸ‘

Now, ask those people if they're glad they went through with the purchase in 2020 and 2021..

I think they're pleased they got in when they could.

βœ… The main point: as experts and advisors, we must know the major "whys" behind the market.

I'm not saying memorize all the details, but at least know the big picture drivers.

This goes for the market challenges as well.

Maintaining balance between optimism and addressing real issues up front add credibility and enhance our value to our clients. βš–οΈ

They'll trust us more because we don't just tell them it's a great time to buy or sell.

We're honest and realistic when managing their expectations which will pay dividends in the long-run. 😁

All is not lost with insurance. We'll cover the action designed to fix the issue and what to expect going forward next week.

Dr. Alex Stewart


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  3. πŸ“Š Schedule a live presentation: Want to learn in person? I offer the MarketPulse 360 presentation that connects all the dots (national to local) so you get a comprehensive breakdown of today's market. It's 2 hours of beautiful charts designed to give you all the major trends you need to know about and address the most common questions in the market. You'll walk out feeling more confident, with resources to use in your business, and a level above the rest of the Realtors who are wandering around blindly.

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