Floridians are paying three times more for home insurance than they were five years ago–the average homeowners insurance payment is $6000 compared to just under $2000 in 2019. The costs will take another leap next year.
Meanwhile, Gov. Ron DeSantis and the Republican legislature have been gifting insurance companies with more tax breaks, subsidies of $1 billion to help pay reinsurance costs–the amount the insurers borrow to pay for increased costs of covering homeowners policies, and making it harder for homeowners to sue insurance companies that fail to honor their contractual obligations.
This is political grift by Florida Republicans who have taken $9.9 million from insurance lobbyists since 2019, according to a report by Florida Watch. This money has flowed to Friends of DeSantis and to the Republican Party of Florida.
The political line of DeSantis and Florida Republicans is that much of the increased costs of insurance is driven by out-of-control lawsuits peddled by attorneys and third parties who have colluded to flood the industry with frivolous claims. Florida law has allowed a transfer of legal claims from homeowners to third parties who have then exercised their rights to sue insurance companies for alleged failures to honor the obligations of policies.
The Florida legislature passed a bill during the 2022 legislative session that prohibited some of these claim transfers, though loopholes remain, in addition to making it more difficult for homeowners to sue insurance companies. Homeowners now have to pay the full legal costs of lawsuits if they are unsuccessful, which is designed to tilt the playing field even further to the advantage of insurance companies.
Over the last two years, Florida insurance companies have altered the work of licensed adjusters to slash the claims of Floridian homeowners by as much as 97 percent, according to a detailed study in the Washington Post. In other words, the insurance lobby has felt emboldened by DeSantis and the Republican legislature to override claims and to lower their obligations to policy holders by whatever means necessary.
At the same time, it is not escalating lawsuits that are the primary factor driving up insurance costs in Florida. The lawsuits are concentrated among a wealthy group of litigants and directed toward a minority of firms within the insurance market of the state. If the lawsuits were the primary reason for escalating costs, their impact would be more dispersed across the Florida insurance market.
Climate change is the elephant in the room driving the rates of Florida insurance sky high. This is manifested by the increasing frequency and intensity of hurricanes in recent years, which has been the biggest factor increasing costs for insurance companies, resulting in several large companies leaving the state and/or dramatically reducing their exposure. The companies that remain are smaller, have less capital to pay high claims and have to borrow money on the reinsurance market to afford day-to-day operations. Lenders in the reinsurance market have hiked their rates due to a combination of climate change modeling (anticipating more deadly and frequent storms), increased costs of borrowing, and increased dependence on creditors.
The upshot is that the insurance market is ill-equipped to deal with climate change. The way insurance works is to spread unrelated costs across all policyholders so that everyone pays for damages suffered by a smaller subset of holders. Climate change breaks this model by the increased severity, frequency and large-scale impact of environmental costs across a wider group of policyholders.
In response, Florida Republicans, encouraged by wealthy developers and real estate speculators, engage in climate change denial and offer only “market solutions” to a crisis rooted in systemic environmental devastation. The “market” means that rich developers can expand wherever and whenever they want, courtesy of deregulation, lower taxes and public subsidies. The rest of the “market,” working class and middle class homeowners, have to fend for themselves. The rich can afford to sue each other, while DeSantis and the Republican legislature wants to make it cost prohibitive for ordinary homeowners to fight back.
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