‘Swirling the drain.’ Florida’s insurance market crisis featured in Congress

Deborah Wood’s insurance story is a familiar one in Florida.

Dropped by one insurer in 2017, her new carrier raised her premiums to the point that she and her husband decided to sell their Plantation home and move in with their daughter in Tallahassee, she told senators Wednesday in Washington, D.C.

Wood testified alongside insurance experts during a Senate Budget Committee hearing about how much climate change was to blame for Florida’s insurance crisis — and how what was happening in the state offered a glimpse of what homeowners nationwide could face.

Senators were told that Floridians were paying the highest premiums in the country and that many of the state’s insurance companies are flimsier than they appear. They heard that the nation is ill-prepared if climate change causes more hurricanes, tornadoes and wildfires.

READ MORE: Florida insurers are using a simple trick to avoid publicly announcing big rate hikes

“This all looks like an insurance market that is swirling the drain,” said Senate Budget Committee Chairman Sheldon Whitehouse, D-R.I.

Wednesday’s hearing brought a rare national spotlight to one of the top concerns on the minds of Floridians, who have seen their premiums skyrocket, been dropped by their insurer or had to battle with companies over storm claims.

Florida Sen. Rick Scott, who serves on the committee, did not attend. A spokesperson said he was serving at the same time on a committee dealing with veterans’ issues.

Sen. Chuck Grassley, R-Iowa, said Wednesday that six homeowners insurance companies have already stopped writing in his home state, which has been battered by hail and windstorms.

Insurers lost money in Iowa and 17 other states last year, The New York Times reported last month.

“Florida’s experience is a warning of what we may see in the future in other states,” testified Rade Musulin, an actuary who was involved in creating Florida’s Hurricane Catastrophe Fund in the 1990s.

READ MORE: When Florida insurance companies fail, executives jump to new firms

Dispute over the causes of rising premiums

Whitehouse pointed to climate change as the culprit behind turmoil in the insurance industry. Last year, he sent a letter to Florida’s state-run Citizens Property Insurance, asking how it planned to deal with climate-related losses.

But Grassley noted that automotive premiums, which aren’t tied to climate change, have also skyrocketed around the nation.

EJ Antoni, a research fellow at the conservative Heritage Foundation, testified that inflation, protests by Black Lives Matter and “general lawlessness in American cities” were to blame for rising premiums. The foundation wants to dismantle the federal government’s efforts to combat climate change.

Inflation is widely considered to be a driver behind increased premiums, since more expensive homes are most costly to insure and rebuild. But Florida’s insurance crisis began in 2017, when the state was hit by its first named hurricane in a decade, and years before the current inflation surge.

Ishita Sen, a professor at Harvard Business School, told senators that the nation lacks enough detailed data on insurance policies and claims to determine the causes.

In Florida, lawmakers and the industry have blamed fraudulent or excessive litigation for the crisis, but they had no data to show how much those lawsuits were costing companies.

“Right now we’re trying to make policy blindfolded,” Sen said.

Sen also testified about a paper she co-authored showing that Florida’s insurance market was full of “low quality” companies that rely on flimsy financial ratings from a single company.

Sen. Mitt Romney, R-Utah, who does not dispute the existence of climate change, nevertheless called the idea Congress could fix it “pie in the sky.”

He asked what officials could do about the insurance crisis. The response from the panelists was to build stronger homes away from coastlines and areas prone to wildfires.

Musulin said local and state officials should also be planning for the future.

“If you’re going to build a house that’s supposed to last 75 years, you ought to be thinking about the climate in 75 years when you give somebody a permit,” Musulin said.

This story was originally published June 5, 2024 at 5:30 PM.