Maurice’s Story and the Growing Insurance Crisis
In times of distress, I have a tendency to be rather sarcastic because I always say I’d rather laugh than cry. And that was kind of one of those situations where you’re literally throwing all your belongings to the street at one time. You’re not being evicted, and your wife’s not kicking you out of the house. Maurice Gutierrez lives in Naples, Florida. His house flooded in 2022 when Hurricane Ian made landfall on the southwest coast of Florida. One of the strongest September hurricanes to strike the U.S. in decades. Significant storm, again, a Category four. The street on the road will be the same. Trees gone, neighbors gone, homes are gone. And, here I am today rebuilding because I won’t move. I love this place.
Insurance Rate Increases and the Decision to Go Bare
A year later, Maurice got a notice from his insurance company. They were doubling his premium to $7,500 a year. The year after that, it was up to a staggering $9,000 a year. Now on a fixed income retiree, that’s not chump change. So Maurice decided to drop his wind coverage. Now, he’s one of hundreds of thousands of Floridians that are “going bare.” That means they’re living with little to no homeowners insurance in a state that is set to have a record hurricane season this year.
The Consequences of Florida’s Insurance Crisis
What’s going on in Florida under Governor Ron DeSantis is a warning: This is what happens when a government capitulates entirely to the insurance lobby. We went to Florida to talk to other homeowners like Maurice. We found out that residents are being priced out of coastal communities and sketchy insurance companies are thriving under DeSantis’ policies. It’s essentially trickle-down economics but for insurance companies. And the housing insurance crisis isn’t just a problem in Florida. People around the Bay and across the state are now being told their homeowners insurance policies will not be renewed. State Farm says they’re discontinuing coverage for some customers. Several major carriers are pulling out of Iowa and other states. Experts warn the collapse in the homeowners insurance industry could take down the entire housing market with it. Should those systems start to collapse or should that business model collapse, it could take down the entire American economy with it; it could take down the global economy.
Maurice’s Experience and the Struggles of Florida Homeowners
The water came up to this line right here. At first, it’s like, it can’t get much worse. It can’t get much worse. And then it’s like, my God, when is it going to stop? Maurice has lived in Florida for most of his life. Raised in Miami, so hurricanes to us are, as far as I’m concerned, a weather event. You know it’s coming, you prepare, you don’t get complacent, but you get used to them. Nearly one out of five Floridians is like Maurice, They’ve been forced to cut back or go without insurance. That option allows me to manage my own risk.
The Growing Risk of Climate Change and the Insurance Industry
Okay, let’s back up and talk about how insurance actually works. Insurance companies determine premiums for you based on risk assessment. Generally speaking, the higher the risk, the higher the premium goes. They assess risk factors like the quality of building materials in your house, your neighborhood, what kind of dog breed you own, and, of course, natural disasters. So, you know, if you have a wildfire risk in California and a hurricane risk in Florida, those two things are supposed to balance themselves out. But as the planet warms and natural disasters increase, the insurance business model hasn’t been keeping up.
The Strain on the Insurance Model
And what’s happening is that the risks of some of those perils, particularly climate-driven perils, are increasing so much that the insurance companies are having a difficult time making the profit they’ve always expected they would make. In response, major national carriers are raising rates and cutting policies. Today, 12% of people in the United States don’t have homeowners insurance.
Priscilla O’Hara’s Struggles with Insurance
Up the coast, in Fort Myers, Florida, is Priscilla O’Hara. She stayed in her home during Hurricane Ian, just like Maurice. My son and I stood at the front door looking out the glass window and watched– the rivers right over there–watch the water coming up. And here it’s going. Nothing we could do. Here it’s coming. And then the wind changed and about ten feet from the house and back out it went. Her roof was damaged, but when she filed the claim, her insurer, State Farm, told her that her policy didn’t cover wind. I don’t think we really realized that we were not covered for wind damage, did not know that. I mean, hurricanes are wind.
The Challenges of Insurers in Florida
The next year, State Farm dropped her. They said her house, which was built in 1976, was too old to insure. I’ve been with them for 40 years, probably. It was a total shock. State Farm ended that year with a net worth of $131 billion. Like a good neighbor. State Farm is there. The roof damage cost her over $6,000, which she paid out of pocket.
The Risk of Not Having Insurance
Priscilla shopped around, but she couldn’t find an insurer that she trusted. I want a company that I know something about. Not some company I’ve never heard of before. That seems smart. Yeah. We had that roof damage. I could do it again, I guess. Don’t want to, but I guess I could. So what exactly happens to someone if they don’t have insurance? If you don’t have insurance for your home, you might lose your mortgage or you might face higher mortgage rates and worse, if you have a disaster and your home is uninsured, then you lose the value of that home or face out-of-pocket costs to repair that house, which could be hundreds of thousands of dollars or more. So it can be absolutely bankrupting.
The Unique Situation in Florida: Citizens Property Insurance
Priscilla and Maurice have both paid off their homes but if you have a mortgage, you have to have homeowners insurance. So for people who can’t find insurance, Florida has something unique. A state-run, not-for-profit backstop that is actually the number one insurer in the state: Citizens Property Insurance. Citizens Property Insurance was established in 2002, ten years after Hurricane Andrew hit Miami. Hurricane Andrew was at the time the costliest hurricane in Florida’s history, and it hit the insurance industry hard. And the state was facing the prospects of an incredibly precipitous economic decline. And they wanted to avoid that.
Citizens Insurance as a Last Resort and the Problem with Rising Rates
Citizens was supposed to be the insurer of last resort, but then the state was hit with a record hurricane season in 2004 and again in 2005. As more parts of Florida became uninsurable, Citizens expanded to protect more homeowners. Now, 1.2 million Florida residents have public instead of private insurance. This backstop is important. If you start to lose insurance in a community, then the home values will drop as a result of that.
The Strain of Rising Homeowners Insurance Costs
The housing market will face a crisis if home values continue to drop. Homes in coastal Florida could be overvalued by as much as $10 billion a year due to flooding risks. Even though some may think, “Well, luckily, I don’t live in Florida,” the rising costs of insurance are a growing issue across the United States.
The Failures of the Public Model and the Future of Insurance in Florida
But the public model has a major flaw; it’s put more people in the path of risk. So it’s increased their economic vulnerability. But it’s also affected the way Americans vote. It’s affected climate policy on a state level and on a federal level because constituents are not expressing urgency to enact policy to address climate change. None of this has stopped people from moving to the coasts. In 2023, a year after Hurricane Ian’s devastation, Lee County’s population still grew. But the people who have been able to rebuild and afford their homes have changed.
Fort Myers Beach: Rebuilding Amid Rising Insurance Costs
Fort Myers Beach is a coastal island just west of Fort Myers. It’s been a popular resort town and home for retirees since the 1950s. Ian was the costliest hurricane to ever hit Florida. The Category four storm did $112 billion in damage. And Fort Myers Beach was one of the hardest hit. A third of the homes on the island were destroyed. But the town is rebuilding.
The Struggles of Rebuilding and the Impact on Real Estate
Everywhere you look, there are cranes and scaffolding and large RVs where former residents were staying. We met with Lorrie Curry, a real estate agent who has sold property on the island since 2004. She says a lot of the smaller retiree homes built in the fifties and sixties were damaged, and they’re being replaced by rentals bought by wealthy investors. Many former residents struggle to rebuild, and the cost of building is skyrocketing.
The Growing Role of Start-Up Insurance Companies in Florida
In 2022, Governor Ron DeSantis caved to the insurance lobby and created an environment for insurance companies to thrive. New companies like Slide Insurance, founded by a former Enron lawyer, are capitalizing on the market. However, these smaller companies are much more risky and have fewer resources than national carriers.
Conclusion: The Future of Insurance and Homeownership in Florida
The growing crisis in Florida, driven by climate change, rising insurance costs, and a lack of affordable coverage, has left many Floridians scrambling. The state-run Citizens Insurance is overburdened, and private insurers are increasingly refusing to cover high-risk homes. The future of homeownership in Florida and other at-risk states remains uncertain as the insurance market continues to change.
