High home insurance rates in Florida have been attributed to rampant fraud among contractors – but Hurricane Ian made rates really jump.
Across America, and the world, ordinary people’s greatest source of wealth is their home. What happens as climate change and weather extremes begin to eat away at that nest egg?
Homeowners from Sarasota south to Naples, known for its eight-figure waterfront mansions, are having a tougher time selling their properties, and the buildup in inventory has caused home prices to fall at some of the fastest rates in the nation. Realtors point to rising insurance costs that were exacerbated by Hurricane Ian in 2022, prompting some homeowners to list their homes for sale and would-be buyers to walk.
“You’ve got people that went through the storm and just want to move on, and don’t really think the affordability is here anymore because of insurance,” said Marlissa Gervasoni, president of the Royal Palm Coast Realtor Association. “From what I’m seeing, I believe they are looking for areas that might be less costly.”
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Homeowners policies across Florida started soaring in 2020 because of what insurers and state regulators attributed to rampant lawsuits and fraud. Rates in the state climbed as much as 33% annually, then shot up another 42% last year in the aftermath of Hurricane Ian, according to the industry-funded Insurance Information Institute.
Ian, a Category 5 storm that was the third-costliest in US history, led some insurers to pull out of the state or limit new policies. Floridians paid $6,000 on average for insurance last year, about triple what they paid in 2019. By comparison, the average US homeowner paid about $1,700 in 2023, the III said.
In Fort Myers, where hundreds of homes and business were destroyed by Ian, “we’re seeing anywhere from a 50-to-100% increase in spending depending on the age of the home,” said Gervasoni, head of that area’s Realtors board.
Florida legislators have passed laws recently to bring insurers back into the state and lower rates, but they remain high.
As firms exit some areas and demand higher premiums in others, affordable home insurance cover — for many an essential annual outlay, often a condition of their mortgage debt — is getting harder to secure. The global picture explains why. A run of four consecutive years when overall insurance losses from natural catastrophes have topped $100bn, previously the mark of a remarkably bad year, has spooked executives.
In the US, a repricing of risks has sparked a significant rise in premiums. Several big US insurers, including State Farm and The Hartford, have paused their underwriting of new home policies in the state of California. A significant factor has been a sharp rise in the cost of property catastrophe reinsurance, or insurance for insurance companies.
European executives also warn that insurance prices will have to rise after a series of extreme weather events on the continent. In Australia, the biggest yearly price rise in two decades left 1.24mn households facing “home insurance affordability stress”, up from 1mn the year before, according to the country’s Actuaries Institute.
All this is adding greater urgency and attention to a challenge long predicted by environmental activists: that climate change will make parts of the world uninsurable. Senior industry executives are now unambiguous in making a link between man-made global warming and the insurance affordability problems.
“This is the first time we actually bring a climate change bill back to the consumer, if you think about it,” Christian Mumenthaler, chief executive of Swiss Re, one of the world’s biggest reinsurers, told Davos delegates in January.
Rising insurance premiums were a kind of carbon price on consumers, he said, with higher costs resulting from “us living the way we’ve been living”. He added: “But of course [consumers] don’t like it and the politicians don’t like it.”