If you have owned a home for more than a few years, you may have noticed your cost of insurance rising. Many homeowners who have never filed a claim are wondering what is causing noticeable rate changes.
While some factors are affecting Homeowners insurance rates throughout the country, in Florida there are additional factors further driving higher premiums. Below, we go into detail about what's happening along with what to do.
Hard Market
Insurance is a global market. Regardless of whether you are buying insurance in Florida or Iowa, it’s quite likely the company you’re buying from is buying “reinsurance,” or policies that protect the insurance company against increased exposure. As a result, whether your state, city or neighborhood has had an increase in the number of Homeowners claims or not, if there are an increased number of catastrophes worldwide, it affects the cost of reinsurance and therefore the cost of your insurance policy.
There are periods when the number of insurance claims paid, and the amounts paid, are lower and, as a result competitively priced insurance is relatively easy to come by. We had been in this period—called a soft market—for about 10 years.
Then, there are periods of time when the number of claims paid, and the amounts paid, are higher. As a result of this, insurance companies pay more for reinsurance and are generally increasing rates to ensure their viability as the try to recover from this increased claim frequency and claim severity. This is called a hard market. In a hard market, rates go up, underwriting requirements tighten and some types of insurance policies are increasingly difficult to obtain.
The U.S. experienced 14 separate billion-dollar disasters last year and, the decade of 2010-2019 was a landmark 10-year span of billion-dollar weather and climate disasters. As a result of hurricanes such as Irma, Matthew, Dorian and Michael, the California wildfires, increasing tornado activity in the U.S. along with global catastrophes (think Australian wildfires), U.S. insurance companies are paying more for reinsurance and the market is turning hard, which means higher rates for many homeowners.
Repair Scams
According to the Florida Association of Insurance Agents, Assignment of Benefits scams are a leading cause of rising insurance rates, and fraudsters see post-hurricane wreckage as a prime opportunity to prey on homeowners.
In such scams, deceitful repairmen, roofers, plumbers, etc. tell homeowners that they will make the insurance claims process easy for them by acting as the go-between with the insurance company. To do this, they ask homeowners to sign a paper, giving them the rights to do this. DO NOT DO THIS. When you, do, you have assigned your Homeowners insurance policy benefits to them. Now, homeowners don’t see bills submitted to insurance companies, get charged outrageous rates and sometimes the work doesn’t even get done to the homeowner’s satisfaction. But, if you’ve signed the Assignment of Benefits, you’ve legally surrendered all of your rights to the repair company and the insurance company can’t do anything to protect you. And, it’s nearly impossible to reverse or cancel the Assignment of Benefits once you’ve signed it.
Here’s an example of how it works: A cracked water pipe floods a home. A plumber fixes the leak and refers the homeowner to a water extraction company, that tells the homeowner he/she must sign a contract before they can begin work. The homeowner often doesn’t know about the Assignment of Benefits provision or understand its implications. The homeowner signs the “contract” and the insurance company is billed $12,000 but knows that extractions for a comparable house typically run about $3,500. It investigates or attempts to negotiate, but the mitigation company files suit and threatens to put a lien on the homeowner’s residence.
In far too many situations, the claim—which includes attorney fees that mount quickly—is paid, but the homeowner is left with an incomplete job, shoddy workmanship, no recourse and a Homeowners insurance policy with rapidly rising rates as a result of the overinflated claim.
Be on the lookout for such scams. If you have a loss, always contact your insurance company directly to report a loss and determine the best way to proceed. This is almost always the quickest way to get an adjuster out and temporary repairs underway to protect your property from additional damage and get your permanent repairs going quickly and fairly.
The good news here is that in 2019, Florida lawmakers passed legislation to address Assignment of Benefits fraud. Many insurers are hopeful the new law will address these problems, while some in the industry remain skeptical. The only way to eradicate this fraud is to have informed homeowners alert to the fraud who say “no” when asked to sign any contract or agreement with Assignment of Benefits in it.
Litigation
The rapid increase in litigation against insurance companies in recent years is hurting homeowners across the state because insurance companies are having to raise rates to keep up with exposure caused by the increasing number of lawsuits they’re facing, primarily from Assignment of Benefits and water damage claims. From 2013 to 2019, litigated cases rose from 27,000 to 89,000, or more than three-fold in six years.
You’ve probably heard or seen advertisements from attorneys who say they’ll make sure your insurance company pays, but an attorney should never be the first person you contact when you need to report a loss. Your first step should always be to reach out to your insurance company directly by telephone if possible or via their claims reporting website.
If you feel your claim isn’t being fairly assessed by your insurance company, consider escalating your concerns to the company’s Claim Manager or someone at a higher level. If you still feel you’re not being treated fairly, contact our dedicated customer service team.
What to do
In this market, we strongly urge customers to:
- Stay with the insurance company you’re with because other options may not be available. Many insurers are scaling back on what they’ll insure, and reshopping your policy may lead to a decision by the insurer to no longer accept your home as risk they’re willing to insure. We helped you choose the insurance company you’re with because of their strong financials, ability to pay claims and competitive pricing
- Do not change/remove coverages or lower your limits of coverage as a means to lower your premium. Oftentimes, the savings do not offset the future out-of-pocket of a potential loss
- You can consider increasing your deductibles to help lower your premium but be sure that whatever amount you’re considering you can afford out of pocket. Remember that the deductible amount is the amount you pay in the event of a claim before the insurance company starts to pay the remainder of the claim amount up to the selected limit of coverage
- Review the discounts you have on your policy—if there are others you believe you are eligible for, call your agency. Depending upon the insurance company that your policy(ies) is with, you may qualify for discounts for having a newer home, an impact-resistant roof, a security system, etc.
Brightway is working hard to continue to earn your business and to be your agent for life and in doing so want to make sure you have the best coverage possible at a price you’re comfortable with paying.
If you are not a customer of Brightway Insurance, you can click here to find a local Brightway agent.