How can we solve the insurance problem in Florida?
 

People are complaining about insurance costs going up. However, insurance is merely spreading the risk of losses over a large number of people. The chance of a single home burning down in a year is quite slim so insurance companies can sell home insurance to everyone in a city and use the premiums from those whose homes are not burned down to compensate the few policy holders whose homes are burned down. That is how it works in theory.

However, I am not sure if that works in the case of catastrophic losses such as hurricanes that hit thousands of homes and businesses. Hurricane Ian caused about $100 billion in damages in Florida. The population in Florida is about 21 million people and the average household is about 2.5 people. If you divide $100 billion by 21 million, that is about $4700 a person. If you multiply that by the number of households, each household would have to pay $11,750 just to pay for Ian.

Ian is a bit of an exception since Florida doesn't get an Ian every year. However, Florida gets hit with a hurricane about once every two years and seems to get hit with a major hurricane at least once a decade. Irma cost about $30 billion in 2017.

I am not an underwriter or an actuary but I don't see how people in Florida can pay enough insurance to cover their losses. Hopefully, there are some insurance people on this board that may have solutions.

Stopping the roof scam would help. Make the homeowner pay for second opinion on whether roof needs to replace under insurance.

Stop the roof scam and restore insurance regulations.

I agree with that. I would think that the roof scam would be a relatively easy fix.
Maybe the $100 billion damages number is 75% fraudulent but I have not seen any evidence of that.

But if you have legitimate losses of $100 billion, how can 21 million people pay for that?

I think you are comparing apples to oranges. The total damage included more than just private homes. Much of the damage was commercial and Government buildings, roads and bridges, etc. Also, the Federal and State Government provided funds and loans to cover much of the damage and cleanup work.

Insurance is increasing nationwide, a good deal of it is at least partially due to the plethora of natural disasters. Not just a Florida problem.

Things can only be changed within the ability to control them. Nobody can change natural disasters. What can be changed?

- People living inland, who have significantly lower exposure to natural disaster risk, should not have their premiums jacked up to subsidize those who choose to live closer to harms way. If people living close to the shore can’t afford, or get, insurance then that shouldn’t be others problems for their riskier choices.
- Do something about the roofing scam, like pro-rating replacement based on age.
- Regulations on insurance companies needs to strike a delicate balance between protecting both the customers and the insurers. If the regulations are too onerous for insurers, they will simply pull out of the market. Insurance Companies are all about diversifying risk, unfortunately hurricane risk is next to impossible to diversify. It’s critical to have as many Companies as possible willing to write policies in the market to keep any individual company’s exposure to the region down, resulting in lower premiums. The opposite is happening in Florida, as evidenced by Farmers pulling entirely out of the state. That leads to thousands of homeowners looking for policies from a limited number of remaining insurers who have little or no appetite for more correlated risk that can’t be diversified away. Under that scenario, premiums can only go in one direction.

IMHO, the legislators need to actually INVITE the insurance companies to the discussions about proposed changes and then come to a common ground and understanding of the situation, unfortunately, I am sure this will never happen.

I am not a legislator and I do not work for an insurance company but I assume that the insurance companies have lobbyists in Tallahassee and that they are in contact with the legislators.

Makes sense

I just pulled my insurance policy and looked at it. 75% of the premium is for hurricane exposure!! And my hurricane deductible is $6500.

Insurance companies prorated roof claims, and there is always self insuring.

Self insuring is always an option. If you are paying $6,000 a year for property insurance, you would spend $180,000 over the next 30 years. If you get hit with a hurricane and have major damage to your house, the damage would probably far exceed $180,000. However, if you don't get hit and have no damage or claims over the next 30 years, you have wasted $180,000.

+1 tophcfa

"- People living inland, who have significantly lower exposure to natural disaster risk, should not have their premiums jacked up to subsidize those who choose to live closer to harms way. If people living close to the shore can’t afford, or get, insurance then that shouldn’t be others problems for their riskier choices."

If folks want to live on the Florida coast or adjacent to the San Andreas Fault in California, they should be in their own group. I do not want to subsidize their risk at all. Here in Central Florida any one of us could have our house hit by lightening or a tornado, not as a result of our foolish decisions.

Prorate roof claims based on age of the roof. No one should get an old roof replaced for only the cost of a deductible.