As costs for some double, what's behind skyrocketing increases in homeowners' insurance
WASHINGTON (TND) — Many homeowners across the country face an increasingly difficult time getting affordable property insurance. It's leaving some with inadequate and sometimes no coverage at all when disaster strikes.
Spotlight on America National Investigative Correspondent Angie Moreschi looks into what's driving this trend and which states are the worst when it comes to getting homeowners insurance.
EXTREME WEATHER FACTOR
From tornadoes to wildfires to severe storms, extreme weather is sweeping across many parts of the country this summer wreaking havoc and causing destruction for homeowners.
Data shows these damaging weather events are increasing in frequency and intensity nationwide, and homeowners are paying the price with some insurance companies bailing out on coverage in high-risk areas.
It absolutely is bad for consumers,” American Policyholder Association Executive Director Doug Quinn told Spotlight on America. “What it comes down to is a lot of these carriers are saying, we no longer want to accept risk in this state.”
Most recently, State Farm and Allstate, two of the nation’s biggest insurance carriers, stopped writing new policies in California citing the severe hazard of wildfires.
That follows a similar pull-back by several companies in hurricane-vulnerable Florida, including both Farmers and AIG, which stopped taking new customers in the state in June.
It’s set homeowners up for skyrocketing rates.
FLORIDA RATES SKYROCKET
Vince Arcuri is a longtime real estate agent in Tampa and says he’s used to seeing double-digit insurance hikes for homeowners, but nothing prepared him for the bill his own dad got this year.
ARCURI: "All of a sudden, we got the premium this year, and he opened up the mail and it was up 100%, year over year."
MORESCHI: "100%!"
ARCURI: "It went up from $2000 to $4000."
MORESCHI: "What was your reaction?
ARCURI: "Well, we were stunned."
Frankie Arcuri, 86, has lived in the 1,100 square foot home that his parents built for most of his life and says he’s never seen anything like this.
“It was like double. I live on Social Security, and it's too much money,” Mr. Arcuri said.
DRASTIC MEASURES
Homeowners across Florida are getting hit with similar increases, driving some to take drastic measures.
Homeowner Larry Bendik decided to cancel his coverage altogether, after getting hit with a $1,200 premium increase, last fall.
MORESCHI: "So, you made a pretty big decision to go self-insured."
BENDIK: "Yes."
MORESCHI: "Was that a hard decision? I mean, that's a little risky."
BENDIK: "Even if something happened, I would still get stuck with a big bill anyway. You know, it didn’t make sense to pay that premium and get very little in return."
Bendik says, even if he paid the increase, his insurance would only have covered about half the value of his home in a catastrophic disaster, so he decided to take a calculated risk and self-insure.
It’s something a growing number of Floridians are doing when their homes are paid off. The Insurance Information Institute estimates about 7% of homeowners nationwide self-insure. In Florida, that number is double at 14%.
Self-insuring is only an option if your home is paid off because homeowners with a mortgage are required to have property insurance.
STATES WITH THE HIGHEST RATES
Despite the insurance crisis playing out in Florida and California, those high-profile disaster states are actually not considered the most expensive for homeowners’ insurance in the country.
According to Insurance.com, that distinction belongs to three states in tornado alley:
- Oklahoma = $5,317
- Kansas = $4,939
- Nebraska = $4,893
Florida is in the news a lot and the peril is big in California, but what people don’t understand is these Midwest states are getting hammered constantly,” Doug Quinn with the American Policyholders Association explained.
When it comes to premiums based on private insurance, Florida ranks in the middle at $2,426 and California was among the lowest at just under $1,400.
INSURERS OF LAST RESORT
Those numbers, however, are based on a survey of rates from major insurance carriers in each state. They don’t account for hundreds of thousands of customers who can no longer get private insurance in those states and have been driven into state-backed insurers of last resort, like Citizens in Florida and FAIR in California.
Friedlander blames insurance fraud and lawsuits for driving many companies to limit or pull out of the Sunshine State, forcing a record number of homeowners into Citizens. More than 1.3 million Floridians now get their insurance through that state’s insurer of last resort.
We've never seen anything like this across the country,” Friedlander said. “The state-backed insurer is also the largest insurer. More than 15% market share. Because you can't find coverage with the private insurer.”
Also in California, the Insurance Information Institute says the rates are artificially low because state regulations cap what insurance companies can charge.
“Insurance just doesn't work that way. If insurance companies cannot charge the correct rates for the risks they write, they're not going to stay in that market,” Insurance Information Institute spokesperson Mark Friedlander told Spotlight on America, referring to big carriers like Allstate and State Farm, which recently pulled back on covering homeowners in the Golden State.
Taking into account shrinking coverage options, in addition to cost, the Insurance Information Institute ranks California as one of the five worst states and puts Florida at the top of the list.
It's all left life-long Floridians like the Arcuri’s wondering whether Florida has become unaffordable for the average homeowner.
“It’s frustrating. Florida is really becoming too expensive for people like my dad. Retirees used to come here all the time, but they’re going to have to find another place because regular folks are getting priced out,” Vince Arcuri said.