AAA has announced that they will not be renewing certain auto and home insurance policies in Florida. This decision comes as a result of the state’s catastrophic natural disasters, which have caused unprecedented increases in reinsurance rates. AAA stated that the Florida market has been challenging in recent years, and specifically pointed to the 2022 hurricane season as a driving force behind increased costs. To mitigate these challenges, AAA has made the difficult decision to not renew a small percentage of homeowner’s policies with higher exposure.
However, it’s important to note that AAA is not leaving the state of Florida entirely. They encourage those who are affected by this decision to reach out to their AAA insurance agent to explore alternative coverage options. This move by AAA follows Farmers Insurance’s announcement that they will also be withdrawing certain types of insurance policies in Florida. It seems that more and more insurers are restricting or dropping coverage in states that have been severely impacted by natural disasters.
Florida is known for its population boom, attributed in part to favorable tax benefits, but the devastating weather events have led to significantly higher homeowner insurance premiums compared to the national average. Insurers are increasingly becoming risk-averse in these marketplaces, as the losses incurred from events like hurricanes in Florida far outweigh the losses in other regions during harsh winters. While insurers face political pressure to stay in these communities after such disasters, the damage caused by Hurricane Ian last September may have caused some insurance companies to reconsider their strategies.
Farmers Insurance explained that their decision to discontinue certain offerings was necessary to manage risk exposure effectively. However, this only applies to policies issued through their exclusive agency distribution channel, and 70% of policies currently in force for customers in the state will not be affected. Customers who are impacted by these changes will be notified about the end date of their coverage and will receive guidance on finding replacement coverage.
This trend of insurers restricting or suspending coverage is not limited to Florida. State Farm recently announced that they would no longer accept new applications for business and personal property coverage in California due to historic increases in construction costs, growing catastrophe exposure, and a challenging reinsurance market. Additionally, other states like Louisiana have seen multiple insurers completely exit their markets.
With severe weather events occurring more frequently, experts advise homeowners to plan accordingly. One way to better protect themselves, especially in flood-prone areas, is to obtain federal flood insurance through FEMA. By taking proactive steps like this, homeowners can ensure they are adequately covered in the event of an unforeseen disaster.