The Honest Broker :Why is my Homeowners insurance so high?

The Honest Broker: Why is my Homeowners insurance so high?


Florida homeowners have the highest insurance rate increases in the country. Weather is the primary reason behind the rate increases in Florida. Most states with increases above the national average are prone to major storms and other natural disasters (e.g., earthquakes and wildfires). In addition to Florida, the top states for rising insurance rates include California, Georgia, and Colorado. Another reason for rate hikes for individual homeowners is multiple claims. Once a claim is submitted, Florida insurers reassess the claims history against the policyholder’s premiums. Weather and multiple claims cause rate hikes nationwide amongst the insurance industry. But Florida’s home insurance rates are increasing in 2021 due to a couple of other factors as well.

Why are Home Insurance Rates Increasing in Florida?

Experts cite three reasons for rate increases are:

*AOB (Assignment of Benefits) abuse

*Multiple hurricanes in less than five years

*Loss creep

Assignment of Benefit (AOB) Abuse

Assignment of Benefits (AOB) is an agreement that transfers insurance claim rights or benefits to a third party. An AOB gives someone else the right to make repair decisions, file a claim, and collect insurance payments without your involvement. For example, suppose you transfer your insurance rights/benefits to a water mitigation company. In that case, the company can file the claim and collect the insurance reimbursement directly. However, in Florida and South Florida, third parties have severely abused AOBs. In our water damage example, the water mitigation company now holds the homeowner’s insurance rights. Consequently, they can file a claim with inflated repair costs or charges for services not rendered. Once they file the claim, they pocket the extra funds. Expert’s site two AOB problems that add to Florida resident’s suffering from extreme insurance rate hikes:

   Increased attorney fees associated with AOB fraud

   Inflated payouts on routine claims

Persistent Hurricane Season

Meteorologists are already warning Florida about another above-average year for devastating hurricanes. If they are correct, 2021 will be the fifth consecutive year with at least one major storm to hit the state’s coast. It is estimated that total insured losses from Hurricane Michael in 2018 were $6.6B, with only 84% closed claims. It is not unusual for the number of submitted claims to increase by 8-10-fold during hurricane season. Add total loss to that trend and then multiply that number every year. The result is increased reinsurance costs for carriers and policyholders alike.

Loss Creep

Loss creep refers to when the actual number of claims, the length of settlements, and the extent of damages per claim is greater than the insurance company’s claim projections. Since Hurricanes Harvey, Irma, and Maria in 2017, these claim projections have become increasingly unreliable. Loss creep following claims for Hurricane Michael (2018) is still climbing. In fall 2019, loss creep was already 45% above claim projections. Loss-creep from past hurricanes will continue to drive up Florida insurance rates for years to come.

The Ebb and Flow of Citizens Insurance Company

Citizens Property Insurance Company is Florida’s state-run insurer. The state caps its annual rate increase at 10%. When private insurers are doing well, Citizen’s policyholders shrink. When the market is unstable (like it has been since 2016), Citizen’s customer base balloons. The state insurance company projects an almost 45% increase in policyholders by the end of 2021 from just a year ago. The insurer of last resort for many homeowners is Citizens. Still, with so many private companies increasing their rates, the state’s 10% annual cap is an attractive alternative. 

A new Insurance Bill, SB76, was signed into law last week by Gov. Ron Desantis, as an attempt to address the rising costs of homeowners insurance, litigation, false claims and AOB abuses.  However, it may take between 6-18 months to see some relief for homeowners. The new cap for Citizens Insurance will go from 10% to 15%.

Stay well…


Diane Lott, Broker

Owner: Paradise Found Realty

*The highest compliment you can give is when you feel you can refer a friend…
  Hope to see them soon!

Paradise Found Realty, Inc. of Palm City



Phone:  954-294-5060

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