In Florida, property insurance options are becoming more limited as AAA announces that it will not renew auto and home insurance policies for certain customers in the state. This move comes as a growing number of insurance companies scale back their presence in Florida due to the heightened risk of natural disasters.
In an email statement to CBS MoneyWatch, AAA acknowledged that Florida’s insurance market has become increasingly challenging in recent years. The catastrophic hurricane season of the previous year led to a significant rise in reinsurance rates, resulting in higher operating costs for insurance companies.
While AAA did not disclose the exact number of customers affected by this change, they did mention that it would impact only a small percentage of policyholders. However, AAA is not alone in this decision, as three other insurers have also recently announced their exit from insuring Floridians. Farmers Insurance, for example, will no longer offer coverage in the state, affecting approximately 100,000 customers.
Bankers Insurance and Lexington Insurance, a subsidiary of AIG, made similar moves last year, citing the increasing costs of providing insurance to residents due to recent natural disasters. Hurricanes Ian and Nicole, which struck Florida in 2022, caused extensive damage and claimed the lives of around 150 people.
Under Florida law, insurance companies must provide three months’ notice to the Office of Insurance Regulation before informing customers that their policies will not be renewed. While some insurers have gone out of business in recent years due to substantial payouts from storms, those affected by AAA’s decision still have alternative options for finding a new insurer.
The state of Florida’s database of insurance companies shows that there are still hundreds of providers, including Allstate, Esurance, Geico, Hartford, and 21st Century, that offer policies in Florida.
However, the rising costs of homeowner insurance in the state are a significant concern. Currently, homeowners in Florida pay about three times more for insurance coverage compared to the national average, and this year, rates are expected to increase by approximately 40%.
Despite efforts by lawmakers to stabilize the market with the passage of legislation in December, insurance companies continue to leave Florida. Governor Ron DeSantis signed a law that establishes a $1 billion reinsurance fund and implements measures to discourage frivolous lawsuits. However, these improvements will take time to materialize, prompting AAA and other insurance providers to make tough decisions to manage risk and exposure to catastrophes.
A similar trend is happening in California, where insurers like AIG, Allstate, and State Farm have stopped accepting new customers due to the escalating costs of underwriting policies caused by wildfires. Scientists attribute the increasing frequency and destructiveness of wildfires to climate change, which has made the West warmer and drier over the past three decades.
According to data from the Insurance Information Institute, California has over 1.2 million homes at high risk of extreme wildfire, surpassing any other state. Insurance premiums are also rising in Colorado due to wildfire risks, and an Oregon initiative to map wildfire risk was rejected last year out of concerns that it would lead to skyrocketing premiums.
In conclusion, the limited options for property insurance in Florida highlight the challenges faced by insurance companies in a volatile market. The increasing risks of natural disasters and climate change effects are driving up costs and forcing insurers to reassess their presence in high-risk areas.
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