[C. C. Rider]

Originally Posted by Rainger99

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.

First, you are overlooking the fact that MOST people have insurance on their home that would cover hurricane damage. Typically, this doesn't cover FLOOD or STORM SURGE damage, but it does cover damage that is a direct result of the wind and any subsequent damage that may be done if the wind causes a roof leak or window breakage or other wind related damage.

Second, you are overlooking the fact that property insurers have RE-insurers which provide insurance to them in case of catastrophic losses. In other words, the insurance companies have insurance too to protect them against unusually large losses.

Third, not all hurricane damage losses are covered by insurance. Much of it is due to flood losses which (usually) aren't covered unless the person or business bought flood insurance which is very expensive. It's expensive because not everyone shares equally in the threat of flood damage.

People who live on high ground have no need for expensive flood insurance, so they don't buy it. People who live in flood-prone areas NEED flood insurance, but since the cost is usually quite high, many people don't buy it even though they may need it.

And finally, we can be thankful that an "Ian" level storm doesn't hit us every year. So, even if the insurance companies may lose money in one year, they can make it up in other years in which their losses are less. It's kind of like the gambling in Las Vegas. Occasionally the house may get hit for a big loss, but they make it up by winning many small bets... and most of the big ones too.

[kkingston57]

Originally Posted by Rainger99

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.

Correct but no one can accurately predict the weather and it's ramifications. As I write this there is a large hurricane in the Atlantic which is expected to have winds in the 160MPH range. It probably will not hit the US. In 2019 Hurricane Dorian missed Florida by 90-100 miles and it had windspeeds in the 150mph range and it stalled. That storm would have been much worse than Ian since it missed a more populated area of Florida. Florida did make some good legislative moves that will get the attorneys out of the insurance adjusting biz. That and stopping roof claims will only make a small dent in the problem. Full disclosure I was an adjuster in Florida for 40 year.

[kkingston57]

Originally Posted by RobertScott

+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.

Agree, and in Central Florida our rates are much less than if we lived on the coast. In Palm Beach County our premium was 5K and when we moved to Central Florida price went down to $1200 and we had much more hurricane protection in S. Florida. We should be paying less here but suspect that our rates are going to sky rocket.

[Rainger99]

Originally Posted by C. C. Rider

First, you are overlooking the fact that MOST people have insurance on their home that would cover hurricane damage. Typically, this doesn't cover FLOOD or STORM SURGE damage, but it does cover damage that is a direct result of the wind and any subsequent damage that may be done if the wind causes a roof leak or window breakage or other wind related damage.

Second, you are overlooking the fact that property insurers have RE-insurers which provide insurance to them in case of catastrophic losses. In other words, the insurance companies have insurance too to protect them against unusually large losses.

Third, not all hurricane damage losses are covered by insurance. Much of it is due to flood losses which (usually) aren't covered unless the person or business bought flood insurance which is very expensive. It's expensive because not everyone shares equally in the threat of flood damage.

People who live on high ground have no need for expensive flood insurance, so they don't buy it. People who live in flood-prone areas NEED flood insurance, but since the cost is usually quite high, many people don't buy it even though they may need it.

And finally, we can be thankful that an "Ian" level storm doesn't hit us every year. So, even if the insurance companies may lose money in one year, they can make it up in other years in which their losses are less. It's kind of like the gambling in Las Vegas. Occasionally the house may get hit for a big loss, but they make it up by winning many small bets... and most of the big ones too.

Even if an insurance company has reinsurance, that is just passing the losses onto another insurance company.

The reinsurance company has to pay so whether 50% of the losses are paid by the insurance company and 50% are paid by the reinsurance company, the premiums have to come from somewhere.

As for Ian being a rare occurrence and the insurance companies can make it up in previous years or future years, the fact is that insurance companies have been losing money over the long haul. I don’t think they would be pulling out if property insurance were profitable in Florida. And as I understand it, to get rate increases, insurance companies have to get approval from the state regulators. They can’t just raise your rates.

[Rainger99]

Originally Posted by kkingston57

Full disclosure I was an adjuster in Florida for 40 year.

So if you were king, how would you fix the problem?

I don’t see a solution because insurance companies have to charge enough in premiums to cover claims - and some of them are over $100 billion. The money has to come from somewhere unless we put an increase taxes on those people who “aren’t paying their fair share.”

[tophcfa]

Originally Posted by C. C. Rider

Second, you are overlooking the fact that property insurers have RE-insurers which provide insurance to them in case of catastrophic losses. In other words, the insurance companies have insurance too to protect them against unusually large losses.

I didn’t mention reinsurance in my previous post because it’s something many folks aren’t familiar with, and I didn’t want to muddy the waters. In its simplest form, reinsurance is just insurance risk traded in a private market between insurance companies. Reinsurers typically don’t actually write policies, they just assume risk, for a price, from other insurers that actually do write policies and need to offload risk to balance their portfolios overall risk profile. The property and casualty insurance business is all about properly pricing and diversifying risk, so statistically they will make a reasonable profit in the long run after cashing premium checks and paying out claims. Diversifying risk is of the absolute most paramount importance, so no single, or sequence of, unpredictable events will cause the entity a catastrophic loss. Reinsurers are no different than regular insurance companies in that they want to hold a very well diversified portfolio of properly priced risk. Unfortunately, tropical storms have become both more severe and less predictable, so pricing and managing the risk has become more problematic. At the same time, populations have migrated to areas like the Florida coastlines increasing the number of insured properties, while insured property values have skyrocketed, and insurers (both traditional and reinsurers) have no additional appetite for assuming more tropical storm risk without HUGH increases in premiums. Why did Farmers make the difficult decision to totally pull out of the Florida market? Because it got too expensive to reinsure the risk they needed to offload to have what they considered a properly diversified portfolio.

I’ll stop there, except to say that the insurance market is totally saturated with its ability to continue to absorb more tropical storm risk, without a very large corresponding increase in premiums. Think of in terms of a stock portfolio, which people can more easily understand. No one wants to own a portfolio of a few stocks, all in the same risky industry, with no diversification. If one event happens that totally rocks that particular industry, their portfolio would be toast.

Dam, I need a beer, I’m glad I retired from that $hit. I much prefer worrying about getting a good t time or an empty lane in a sports pool to swim laps. The important things in life : )

[ithos]

Florida did pass new legislation for insurance reform. Some law firms might not be pleased.

Florida insurance regulation creates big changes | Grant Thornton

Florida is known to be a an overly litigious state with respect to insurance. Florida’s insurance regulators estimate homeowner claims account for 9% of all claims in the U.S., but 79% of all insurance litigation. Florida has now eliminated one-way attorney fees. Now, if an insurer and an insured end up in court and the insured wins, the insurer does not need to pay for the insured’s legal fees. This move by regulators should drastically reduce the insurance companies’ costs.

[rvalukonis]

Originally Posted by Rainger99

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?

A big portion of the expense/loss is infrastructure related borne by the state and local governments and utilities, not individual home owners.

[nn0wheremann]

Much of Florida is over populated and under engineered. The Miami-Dade standards alleviate much of the wind mitigation issue, but fall short when it comes to water intrusion, and roof ventilation. Fortunately we in The Villages, at least in the north districts, have adequate storm water control. Attic ventilation could be improved, so roofs would more likely last to their design lives.

[Blueblaze]

The same thing happened with "health insurance" when we quit calling it "hospitalization" and demanded that insurance companies pay for our doctor visits and prescriptions instead of merely life-threatening catastrophes.

It's got nothing to do with hurricanes, which have hit Florida every year since the beginning of time. It's about human avarice and idiots who demand that someone else pay for their life -- and roof, and doctor, and dentist, and oil changes, and vet bill -- and the moment some crook offers to insure against it, their groceries and tee time, too.

And EVERYONE suffers. You couldn't afford your roof before someone offered to replace it every time you lost a shingle. Now NOBODY can afford their roof OR their insurance. You couldn't afford to go to the doctor every six months without insurance, and now NOBODY can afford a doctor without insurance, and the insurance costs 10 times EVERY MONTH what your doctor used to cost for one visit a year before some crook offered to "insure" you. But lucky you! Now you're old and the gooberment pays that $1,500/month for you.

How to fix Florida insurance? Fix Florida residents so they quit asking insurance companies for handouts.

[garykoca427@gmail.com]

People living on the coast should pay more for insurance than people living inland. These should not be statewide rates for everyone.

[Rzepecki]

Originally Posted by Rainger99

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?

The roof scam was started by the insurance companies and it backfired on them.

[ThirdOfFive]

I admit to not being very knowledgeable about how the insurance system works. I am in pretty much the same boat as many others, dealing with significant (more than significant?) increases in my insurance costs. And not just home insurance but auto, car, golf cart, etc. as well.

I am also paying the price of my own inattentiveness. Moving here three + years ago everything was happening at once, and in the space of three days we took care of every business item related to purchasing our new home, including insurance. Our quote was (for the time) pretty reasonable; we would be paying a little less for homeowner's insurance here, on a property valued at 30% more, than our home in Minnesota. However since then we have experienced two significant jumps in cost; one last year that totalled about 25% more than the annual cost of the insurance, and one just a couple of weeks ago where the premium increased by over $1,400.00 per year--and the only "explanation" was a blurb in the notification that the increase was per decision of the legislature allowing the jump, or some such.

We have an appointment with our local agent this morning to see what can be done. I expect no miracle fixes, but I DO expect that the possibility of losing all our business will be incentive enough for the agent to help us streamline things. I did notice among other things that my hurricane deductible for the policy was $500, and I do know enough about insurance to understand that lower deductibles mean higher premiums. If our agent is willing to work with us and go over the policy to help us trim the fat, we'll stay with them. Otherwise, I will be insurance shopping very soon.

This is something, I think, that all of us can do.

[MX rider]

Originally Posted by garykoca427@gmail.com

People living on the coast should pay more for insurance than people living inland. These should not be statewide rates for everyone.

They already pay more. Our best friends have a home in Bonita Springs very similar to ours. They pay 3 times what we do. Probably going to be more when they renew.

[Joe C.]

Perhaps the insurance industry could make roof replacement a RIDER on the normal homeowner's insurance policy. Maybe make the rider a $1000.00 option. That way, the homeowner who has a new or newer roof can opt out of roof replacement for several years and take his/her chances. Also roof shingle manufacturers have a warranty.