Florida looks to stabilize ‘hard’ insurance market, attract more competitors

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INDIALANTIC — Florida homeowners have seen their insurance premiums spike, driven by a combination of inflation, natural disasters, and fewer companies underwriting policies.

Free—market competition among private insurers is a great thing, but when property and casualty companies leave the state because they do not see a clear path to profitability, consumers are left with fewer

According to data from the Insurance Information Institute, the average premium for Florida homeowners in 2023 was $6,000 per year, a 42 percent increase from 2022.

Home values have risen considerably in Florida over the last four years.

The complex insurance industry is cyclical in nature, fluctuating between “hard markets” and “soft markets.” These cycles affect the availability, terms, and price of insurance, said industry veteran Paul Weber, president of Prime—One Insurance, a full-service independent agency.

A hard market is the upswing in the insurance cycle when premiums increase and coverage terms are restricted.

A soft market, he said, is characterized by stable or even lowering premiums, broader terms of coverage, and more competition among insurance carriers for new business.

“Tn the insurance industry, a soft market is generally called a buyer’s market,” said Weber, a longtime surfing enthusiast. “A hard market is often called a seller’s market because there are restricted terms of coverage and tighter underwriting criteria.

“In my 34 years in this industry, I have never seen a harder insurance market. It’s a tight market with only a few avenues to go down. We need more competition across the board. We need to bring more carriers
into the fold. The more competition the better it is for consumers. And we are beginning to see that happen.”

During a hard market, some businesses may receive conditional or nonrenewal notices from their insurance carrier. And during hard—market cycles carriers are more likely to exit certain unprofitable lines of insurance.

“It’s a double-edged sword dealing with the rate increases and having empathy with what’s going on in the market because we truly care about our customers,” said Weber. “Even in this hard market, it gives us opportunity because we are an independent agent. All ‘our eggs are not in one basket.’ We have the capability to shop the market for our customers.”

The cost of homeowner insurance in Florida has legislators scrambling for solutions. One solution is more competition. The Office of Insurance ‘egulation recently announced that eight new property and casualty insurers have been approved to enter the market, creating a more competitive environment for policyholders. Prime-One Insurance, an independent agency in Indialantic, has been on the front lines explaining and educating its customers on why insurance premiums have risen significantly. From left, the team includes Greg Wagner, vice president; Paul Weber, president; Helene
Masi, customer service specialist; and Maria Ruiz, customer service specialist.

He added, “The biggest challenge is explaining to customers and educating customers on why the cost of their insur- ance has increased. There is one saying I do not like: ‘It is what it is’ That’s not a proper answer for an agent to give to a customer.”

Consumers are grappling with increased insurance costs, yet many of them do not realize the extent to which economic pressures and market dynamics are affecting their rates.

Because independent agents work with multiple insurance companies, they are positioned to help customers take a good hard look at their policies and offer various solutions.

According to a new survey released by the Independent Insurance Agents & Bro- kers of America, a full one-third (32.8 percent) say they are unaware that external economic factors are affecting insurance
rates. Over two-thirds (69.3 percent) have put their insurance policies under review, with nearly half (45.8 percent) citing rising premiums as the catalyst.

Among the studies key findings:

  • Higher Deductibles: 46.6 percent of Americans have considered or already taken a higher deductible to save money on insurance
  • Going Uninsured: 22 percent have considered going uninsured to save money
  • Making a Switch: 83 percent would switch insurance providers for lower cost premiums, while 59.5 percent would switch for better coverage
  • Call My Agent: 56.3 percent buy insurance through an insurance agent versus 36.3 percent who buy online through an insurance company’s s website

Insurers losses globally from natural disasters exceeded $100 billion for the fourth consecutive year in 2023, according to Swiss Re Institute. These losses are being passed on to property owners. Inflation has also pushed insurers to raise rates to cover claims.

Because of surging premiums, many homeowners have cut back on coverage, leaving them underinsured, based on today’s cost to rebuild after a catastrophic loss.

“There are a lot of people who are thinking in the past, believing they can rebuild at a certain price,” said Weber. “Inflation has driven the cost of materials, supplies, and labor up.”

From 2019 to 2023, home insurance premiums rose 32 percent, while rebuilding and replacement costs increased 55 percent, according to the Insurance Informa- tion Institute.

Recently, following legislative reforms designed to promote market stability, the Florida Office of Business Regulation approved eight property and casualty companies to enter the state’s insurance market and begin writing homeowner policies. Two of the entities Orion180 Select Insurance Co. and Orion180 Insurance Co. are headquartered in Melbourne.

“Orion180 has always been focused on providing a premier insurance experience for customers and independent agents,” said Ken Gregg, founder and CEO of Orion 180. “We view Florida as an attractive insurance
market for profitable growth over the long term.

“Given our strong capital position, significant reinsurance backstop, and underwriting discipline, we feel we are in a great position to provide Floridians best-in-class insurance solutions.”

Orion180 was ranked No. 229 on the 2023 “Inc. 500” list of America’s fastest-growing private companies. Companies on the list are ranked by percentage revenue growth from 2019 to 2022. Orion180 experienced 2,441 percent growth during that period.

The other newly approved insurers include Ovation Home Insurance Exchange, Manatee Insurance, and Orange Insurance Exchange.

As insurers failed or left Florida, Citizens Property Insurance Corp. — the state’s insurer of “last resort” — grew and grew. “Now some of Citizens’ policies are being ‘depopulated’ to private insurance carriers,” said Weber.

Citizens says it is taking steps to reduce the assessment risk for all Florida insurance consumers.

In 2023, the “Citizens Depopulation Program” transitioned 223,307 policyholders to private insurance companies approved by the Florida Office of Insurance Regulation. Because of insurance reforms signed into law by the governor, “more policies have been removed through depopulation in 2023 than the 176,682 removed in 2016-22 combined,” according to Citizens.

As a result, Citizens revised its 2023 year-end policy count and exposure projections from 1.7 million policies and $675 billion in total exposure to 1.2 million policies and $551 billion in total exposure. Reduced exposure lowers the risk of assessments. Citizens said it plans to transfer 338,000 policies this year to private companies.

The Florida Office of Insurance Regulation “continues its business development efforts to bring additional insurers to the state through external outreach and expedient application review.”

Weber, drawing on his many years in the insurance agency business, said Hurricane Andrew in August 1992 had a profound impact on the insurance industry and played a major role in transforming the landscape.

“Hurricane Andrew wiped out Homestead. Insurance companies left Florida. Their losses were huge. Hurricane Andrew changed a lot of things, including building codes and catastrophic modeling for insurers,” he said.

Following Hurricane Andrew — which was a 14-in—43-year storm — property and casualty insurance companies in the state were faced with more than $16 billion in insured losses, “a circumstance the companies thought was highly unlikely and were not prepared for,” according to “A Case Study of Florida’s Homeowners’ Insurance Since Hurricane Andrew.”

The research was supported by a grant from the National Science Foundation.

Before Hurricane Andrew, catastrophe modeling was in its infancy. It soon became a mainstream underwriting tool. Insurers started using sophisticated models to assess risk and predict potential losses.

“Insurers are in the business of making money,” said Weber. “They must stay in the profitable margin for company underwriting. The cost of reinsurance has gone up exponentially for insurers. So, what that equates to is higher rates for consumers by the state—approved, admitted carriers.”

Reinsurance, or “insurance for insurers,” transfers risk to another company to reduce the likelihood of large payouts for claims.

Reinsurance rates are likely to continue to rise in 2024, though at a slower pace than in 2023, Fitch Ratings says in anew report. Reinsurance underwriting margins are forecast to peak in 2024. Reinsurance market conditions are likely to start to soften in 2025, as “strong expected returns will attract an increasing amount of new capital.”

In 2023, insured natural catastrophe claims remained well above the 10-year average at $100 billion, despite the absence of a large-scale U.S. hurricane. The protection gap between total economic losses and insured losses remained large as the insurance and reinsurance industry covered only 40 percent of economic losses, according to Fitch Ratings.

“Underwriting is getting tougher and tougher to do,” said Weber, whose father was in the insurance agency ownership business for many years in Brevard.

It’s not only homeowners who are experiencing high premiums. Commercial property owners have seen increases, too, in their coverage. Commercial insurance prices in the U.S. increased 6.6 percent in the fourth
quarter of 2023, according to a survey by Wills Tower Watson Broker Services.

Weber said the commercial market is “starting to loosen up. The age of the buildings and the distance they are to the coast are big factors for underwriters.” He added that property owners should have their buildings evaluated every three years because replacement costs change.

Weber said “keeping up with the changes in state and federal regulations in this industry is challenging. You must stay on top of new regulations because they may affect your clients’ insurance needs, and the way in which agents conduct business.”

The collapse of the Champlain Towers South in Surfside in 2021, which killed 98 people, had a reverberating impact throughout the condominium insurance market in Florida. New legislation was passed.

One of the most substantial new requirements and updates to the Florida Condominium Act is the implementation of “milestone structural inspections” for condominium buildings three stories or higher. A licensed engineer or architect must conduct an inspection to evaluate the building’s structural integrity and make recommendation for any necessary structural improvements.

An initial milestone inspection must be completed by Dec. 31 of the building’s 30th year. Additional inspections are required every 10 years.

For homeowners, now is the time to review your policy coverage as the 2024 Atlantic hurricane season approaches. It runs from June 1 to Nov. 30. Colorado State University hurricane researchers are predicting an “extremely active” season.

The team cites record warm tropical and eastern subtropical Atlantic sea—surface temperatures as a primary factor for their prediction of 11 hurricanes this season.

When waters in the eastern and central tropical and subtropical Atlantic are much warmer than normal in the spring, it tends to force a weaker subtropical high and associated weaker winds blowing across the tropical Atlantic. These conditions will likely lead to a continuation of well above-average water temperatures in the tropical Atlantic for the peak of the 2024 Atlantic hurricane season. A very warm Atlantic favors an above-average season, since a hurricane’s fuel source is warm ocean water. In addition, a warm Atlantic leads to lower atmospheric pressure and a more unstable atmosphere. Both conditions
favor hurricanes, according to Colorado State University researchers.

The team predicts that 2024 hurricane activity will be about 170 percent of the average season from 1991-2020. By comparison, 2023’s hurricane activity was about 120 percent of the average season.

The most significant hurricane of 2023 season was Hurricane Idalia. It made landfall at Category 3 intensity in the Big Bend region of Florida, causing $3.6 billion in damage and resulting in eight direct fatalities.

Colorado State University’s report includes the probability of major hurricanes making landfall:

  • 62 percent for the entire U.S. coastline (average from 1880-2020 was 43 percent)
  • 34 percent for the U.S. East Coast, including the Florida peninsula (average from 1880-2020 was 21 percent)
  • 42 percent for the Gulf Coast from the Florida Panhandle westward to Brownsville, Texas (average from 1880-2020 was 27 percent)
  • 66 percent for the Caribbean (average from 1880-2020 was 47 percent)

In preparing for hurricane season, Weber said it is important to maintain an inventory of your home. A home inventory is a list of significant items within the rooms of the home, with an estimate of the current value of each item.

“These types of inventories can make it easier for the policyholder to file an accurate claim in case his or her home is damaged or destroyed in a disaster,” he said.

As part of the home inventory, the homeowner should include photographs.

Also, agents encourage consumers to consider flood insurance. Flooding is the nation’s most common and costly natural disaster. Flood damages are not typically covered in a homeowner’s insurance policy. The coverage must be purchased separately or as an endorsement to the homeowner’s current policy.

Having worked for more than three decades in the insurance industry, Weber said his customers are like family members. “I’ve built a lot of great relationships over the years working in this field,” he said. “And I greatly enjoy what I’m doing as an independent agent. There are outstanding career opportunities in this business, such as in sales, service, or support. It takes a team effort to be successful.”

Employment of insurance sales agents is expected to grow 8 percent now to 2032, faster than the average of all occupations, according to the U.S. Bureau of Labor Statistics. About 48,000 openings for insurance sales agents are projected each year, on average, over the decade. Many of those openings are expected to result from people retiring from the industry.

Insurance agents receive ongoing or residual commissions each year the policy they sold is in force. “You cannot sit back and be lackadaisical. You must provide top-notch service to your policyholders. This is a service—driven business. Prime—One Insurance is growing in a healthy manner serving Brevard County residents with attractive products and outstanding service.”

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