Insurance Woes in Florida: AAA Joins the Fray, But There’s Hope

The insurance landscape in Florida has been plagued by challenges due to the increasing frequency and intensity of hurricanes and rainstorms caused by climate change. In the aftermath of last year’s devastating hurricane season, AAA, a prominent insurer, announced that it will not renew “a very small percentage” of homeowners and auto insurance policies in the Sunshine State. This move reflects a growing trend among insurance companies seeking to limit their exposure in Florida, despite lawmakers’ efforts to stabilize the market.

While AAA clarified that it was not entirely leaving Florida, the rising reinsurance rates brought on by recent hurricanes have made operations significantly costlier. The policies not being renewed primarily consist of “higher exposure” package policies, which bundle both homeowners and auto coverage and were underwritten by Auto Club Insurance Company of Florida. However, AAA did not divulge specific figures for the affected policies or elaborate on the definition of “higher exposure.”

The impact of this decision is already being felt by policyholders like Lawrence Kolin, whose insurer refused to renew his policy for his historically durable home near downtown Orlando. As his coverage’s expiration date looms closer, Kolin faces the challenge of finding a new insurer willing to provide him with a quote. This dilemma has left many homeowners in Florida grappling with uncertainty and concern over the future of their insurance coverage.

Florida has struggled to maintain stability in its insurance market since the devastating Hurricane Andrew in 1992. The catastrophic event led to the insolvency of several insurance carriers, leaving many others hesitant to write or renew policies in the state. Over the years, the risk for insurers has only increased due to the escalating impact of climate change on weather patterns and the growing strength of hurricanes.

AAA’s decision to discontinue coverage comes on the heels of other insurers’ retreat from the Florida market. Just a week prior, Farmers Insurance announced the discontinuation of new coverage for auto, home, and umbrella policies in the state, adding to the list of challenges facing Florida homeowners.

At the end of 2022, the average annual property insurance premiums in Florida skyrocketed to over $4,200, triple the national average. Consequently, about 12% of homeowners in the state remained without property insurance, compared to the national average of 5%, according to the Insurance Information Institute.

Efforts to address the insurance crisis have been made by the Legislature and Governor Ron DeSantis in the last two years. Special sessions have been convened, with a focus on shielding insurance companies from lawsuits and setting aside funds for reinsurance to protect insurers. However, critics argue that more needs to be done to tackle the root causes of the problem and make housing and insurance more affordable for Florida residents.

Despite the challenges, there is hope that a comprehensive approach by policymakers and insurers can bring stability back to the Florida insurance market. Addressing climate change and investing in resilient infrastructure can play a significant role in mitigating future risks and making insurance more accessible and affordable for all Floridians.