… along with the 20% skim rate for themselves. {{lol}}
{{{ According to the Insurance Information Institute, the average cost of property insurance in Florida this year is $6,000, a 42% increase year-over-year.
The average U.S premium is $1,700, 11% higher than in 2022. }}}
intercst
Don’t think I’d want to own a home in Florida, and if I was the CEO of insurance company, not too sure I’d want to be doing business in Florida.
I hope this doesn’t turn into a devastating hurricane season, but those hot ocean water temps aren’t just some made up pseudo science by tree hugging climate alarmists. Am not liking Florida’s odds for making it thru inscathed ( and we all will feel the pain, expect an increase on home owners insurance, even if you’re 1500 miles away from Florida ).
I am thinking they are going to start raising rates all over the country to make up for it. It really is a socialist country when it comes to the insurance business.
Andy
Rates are set by state agencies, so you’re unlike to be able to justify a price increase in Wisconsin because of losses in California or Florida.
The price squeeze originates with the reinsurance companies (companies that insure the insurance companies) who can raise their rates unlike the regulated insurance companies.
According to the NYT last week:
The cost of reinsurance in Florida jumped 40 to 70 percent this year over last year, according to the Insurance Information Institute. But Mr. Friedlander, the group’s spokesman, said reinsurance rates were higher in Florida than in other storm-prone states because of insurer losses tied to lawsuits.
“Legal system abuse and claim fraud are the man-made factors that have generated Florida’s property insurance crisis, not catastrophe losses,” Mr. Friedlander said. In Florida, insurance companies feel it’s too easy for people to sue them, he said. More than 100,000 lawsuits have been filed each year against insurers in Florida for the past several years, he added.
https://www.removepaywall.com/article/current
DB2
The biggest catastrophe to ever hit Florida isn’t a hurricane, it is “Adjusters”. Apparently there was a kind of loophole in standard insurance policies (HO-2) that allows adjusters to troll the state (literally door-to-door or advertising) and collect clients by telling them “I can get you a new roof for free”. They would make claims out of the blue (“… damage incurred by hurricane ABC 4 years ago”), get denied, sue the insurance company, and wear then down in court until settlement. It became a standard procedure and industry of sorts. And it worked. Not only did it work, I suspect that the insurers, once they reached their ceiling of liability, turned to their re-insurers and had them cover the overage, so once they hit a certain level of payouts, they didn’t care as much anymore to fight them vigorously. And then suddenly after a few years of this, the reinsurers dramatically raised their rates.
As a result, all new homeowner policy renewals are now a different type of policy (HO-3) that has much stronger limits on what is covered and how it is covered. I don’t know the details, but I know they switched me and everyone I know from HO-2 to HO-3 type policies.
LOL, had I been in the know, I might have dealt with any of the multiple adjusters that approached me over the years. But no, instead, my last and only claim ever was after hurricane Wilma (in 2005) due to the damage caused. Many of those adjusters have approached me in recent years, either by knocking on the door, by referral from a neighbor, by flyer in mailbox or on door, by advertising, both online and offline, etc. But since the advent of HO-3 policies, not a single one has approached me.
EDIT: HO-3 policies are also less expensive than HO-2 policies are/were/would have been. My HO-2 renewal (before they stopped writing those policies) was quoted at $9700, but my current HO-3 policy is $6900. Maybe $7200 because I see a balance due of $300 for some unknown reason.
And that is a long way from the climate change claim in the thread title.
DB2
Thanks Bob I should have known that. But if the reinsurance companies raise their rates, won’t that allow the insurance companies to raise their rates? After all they are paying more.
So the storms they have in Florida have nothing to do with it? If those dang people would stop suing the insurance would be dirt cheap!!!
Andy
So they stopped that practice (of Adjusters) going forward Mark and the Insurance is still going up with insurance companies pulling out?
Andy
As noted in the New York Times article, “reinsurance rates were higher in Florida than in other storm-prone states because of insurer losses tied to lawsuits.”
As noted above, reinsurance rates vary by state. I would guess that the cost of reinsurance for an insurance company is lower in Wisconsin than either Florida or California.
If a given state won’t allow insurance companies to set rates high enough (as we have also seen in California) then the insurance companies will start pulling out of the state.
DB2
Put it this way, up until December, I had adjusters knocking at the door, leaving flyers in mailbox and on door handle with a rubber band, sending flyers in mail, emails about it, and ads all over the place. Since January, not a single adjuster has appeared at my door, and I can’t recall the last time I saw a flyer of theirs.
Insurance companies run their business over multiple years, and they’ve suffered losses over the past few years, mostly due to insurance settlements (as described above), and also due to investment losses. Buy a 30-year bond at 2% and when rates rise to 3.8%, you are sitting on hefty mtm losses. Buy into PE or CRE and you are sitting on some hefty losses. And because they’ve been taking large claim losses (many settlements) despite no major storms hitting, and then going to their reinsurer to be reimbursed for some of it. The reinsurers are now worried that if they (the insurers) regularly have $15B in losses without any major storms, they might have $150B in losses with a major storm, so they have raised their reinsurance rates by a lot. Some insurance companies have decided that it isn’t worth it for them to pay such high reinsurance rates, but they are too small to go it alone, or they don’t want to take the risk of going it alone, so they leave the market. Usually leaving a market is temporary, and when things get back to normal (normal meaning that they can earn their usual 10-15% profit) they re-enter the market. Usually re-entering a market is done with much less fanfare than leaving a market.
The storms (weak ones occur every year) are being used as “proximate cause” for the claims that are being settled. It’s reached a level of absurdity such that even claims in areas where the record shows a storm didn’t “hit” are being settled to avoid having to go through the very time-consuming litigation process.
Yep. And Berkshire Hathaway’s GeneralRe subsidiary is the largest reinsurance company. If you own BRK, you’re making money off climate change to the extent that Warren isn’t underpricing his reinsurance policies – and there’s no reason he would.
intercst
I remember reading a story about Berkshire a few years ago (maybe even 10?). As I recall, the gist of the story was that General Re had a big decline in revenue for one or two years, and they were asking WEB about it. He straight out said that they simply don’t take business that they judge to be too risky to provide a reasonable expectation of profit. He further said that some of the other players appear to be underpricing the product and will probably lose money eventually.
Buffet, 2014:
“I don’t think in making an investment decision on Berkshire Hathaway, or most companies — virtually all of the companies I can think of — that climate change should be a factor in the decision-making process.”
2015:
“It just doesn’t operate in that time period.”
2016:
“We’re not denying climate change is an incredibly important subject. We’re not denying its existence. But it will not hurt our insurance business, and it’s immaterial compared to other things that could affect our insurance business…I see nothing that tells me on a yearly basis that global warming is something that should cause me to change my prices a lot, or even a small amount.”
DB2
Farmers is leaving the state, along with 14 other insurers.
The (involuntary) state fund is being left holding the bag. DeSantis’ awful legislation is failing.
“In the brief, Triple-I states that fraudulent roof-replacement schemes and too much litigation, coupled with generous attorney-fee mechanisms, resulted in huge net underwriting losses for Florida’s homeowners’ insurers.”
This will get much much worse. Only losing family members hurts more than losing a home, and losing a home with no or shortshrift compensation will send people mad.
david fb
You need to post a more recent news article – Here’s the July 6, 2023 Barron’s
{{{ Berkshire Hathaway and other property insurers are making big bets on Florida, predicting that healthy premiums will offset losses in the event of a big hurricane. The big unknown: whether the weather this season will cooperate.
Florida isn’t just an epicenter for hurricanes, it’s also at the forefront of an uncertain market for property insurers. Some are underwriting more policies because premiums started to jump this spring, which would help cushion potential losses. Others have pulled out over fears of another year of severe storms.
The risks and rewards of catastrophe underwriting can be dramatic. Look no further than Berkshire (ticker: BRK.A). Depending on whether a major hurricane hits the Sunshine State this year, the insurance giant said it could either make several billion dollars in profit or lose as much as $15 billion.
Ajit Jain, Berkshire’s vice chairman of insurance operations, told shareholders at the annual meeting in May that the company had underwritten as much property-catastrophe reinsurance as its capacity allowed at the April 1 renewable date. }}}
intercst
What is the legislation?
DB2
Thank you for the link.
DB2
Our rates here in VA, one property in the mountains and one in suburbia are up about 50% this year. We are currently looking for new insurance. There have been no catastrophic events, we have filed no claims and I am talking about two different insurance companies. Watch out when your renewal comes due as it’s likely that you too will see a large hike.
IP