Most consumers don't have time to read the fine print on their Florida home insurance bill. They don't realize that even those who live in interior, landlocked, Northern Counties are subsidizing the cost of home insurance for those who live on the Florida coast. Here's why you are paying the Florida home insurance bill of someone else, even when you are buying auto or business insurance!
The Florida home insurance crisis is still alive and well as Florida homeowners insurance companies continue to leave the state and/or seek major rate hikes. Both the companies and state regulators can't agree on the appropriate amount that homeowners should be paying to insure for losses against major Florida hurricanes.
As a result, beginning in the 1990's, Florida started to impose special assessments on every Florida homeowners insurance policy issued and created a state run insurance company of last resort that is called Citizens Property Insurance Corporation to ensure that everyone in Florida can get home insurance coverage for their home.
Florida also created The Florida Hurricane Catastrophe Fund which requires all licensed Florida homeowners insurance companies to buy reinsurance after the losses from a major hurricane reach a certain level. This fund is insurance for Florida insurance companies and helps to make sure that they don't have to absorb all of the costs of a major hurricane event.
Finally, Florida created a legal entity called the Florida Insurance Guaranty Association (FIGA) that will pay your insurance claim if your Florida homeowners insurance company is declared insolvent.
Those special assessment line items on your Florida home insurance bill can cause you to pay line item charges for many years into the future. You can be asked to make up the difference when Citizens Property Insurance Corporation and the Florida Hurricane Catastrophe Fund don't have the money to meet their obligations. Or you could be assessed for the difference if FIGA doesn't have the cash to pay off the claims filed against a Florida homeowners insurance company that became insolvent.
So far, at high level, each of these various entities and the protections that they offer make sense. And when they work properly they do help further diversify Florida's hurricane risk and help make it attractive for Florida home insurance companies to continue to do business in the state.
However, the Florida Insurance Laws passed in 2007 and 2008 have altered and politicized the goals of each of these entities to a point where they no longer function as originally intended. Why? Because Florida lawmakers are afraid to tell the public the truth - that these entities are now seriously underfunded and not positioned to do what they are supposed to do. Even worse, many Floridians don't know that they are subsidizing the Florida home insurance premiums of someone else.
Presently, both the Florida Hurricane Catastrophe Fund and Citizens Insurance Florida do not have enough money and are overly dependent on an unfriendly bond market to satisfy their responsibilities. Both organizations have to borrow before Florida hurricanes happen with limited success to come up with the money they need - and they are coming up short in the bond markets as the country continues to work through the financial crisis.
Citizens Property Insurance Corporation is the one organization that causes each of us to subsidize the Florida insurance costs of someone else. Every one of us will be required to pay annual special assessments for many years into the future to cover the cash shortfalls that Citizens Property Insurance had as a result of the 2004/2005 storms. Cash shortfalls are just another way of saying that those who were insured with Citizens for the 2004/2005 storms, were simply not charged enough premium for that coverage. Many of those homes are older homes that are located in areas of Florida that are the most susceptible to hurricanes. After the Florida hurricanes of 2004/2005, Florida legislators decided to freeze the home insurance rates being charged by Citizens - a politically popular decision that also resulted in everyone in Florida subsidizing the homeowner insurance rates of others who live in the areas most vulnerable to hurricanes.
Last but not least, because the rates of Citizens have been frozen for the past few years, even when consumers can find Florida home insurance in the private market, they are still given the choice of being insured by Citizens and being undercharged for their insurance.
This free ride that many Citizen policyholders enjoy comes at a price. It is funded mainly through special assessments that all of us are required to pay on our Florida homeowners insurance bills each year. These assessments have become so burdensome, that Florida home insurance policies don't come close to being able to pay the tab. That's why you'll see many of them on your Florida auto and business insurance bills as well.
If you are tired of paying the Florida home insurance bills of someone else, right now is the time to have your voice heard during the current session of the Florida Legislature. Tell the lawmakers that you've voted for and sent to Tallahassee that you want the Florida home insurance rates of Citizens Property Insurance Corporation raised to reflect the true cost of the homes they are covering.
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