News for homeowners in Florida who wish to have insurance is rough. Insurance companies can’t do business in Florida, mostly because of the high cost of hurricane damage. The average Florida homeowner is paying $4,231 for their property insurance: nearly triple the national rate of $1,544. Homeowners in Florida pay the highest rates of any state in the US. Those rates are set to increase in June by an estimated 40%, on average.

The state of Florida has a taxpayer funded insurance system for those who cannot obtain homeowners’ insurance from a private carrier. This carrier is called Citizens’ Insurance. One in five Florida homes is insured by that fund, and that number will continue to climb as insurers leave the state. Things can’t continue on this path.

Insurance is nothing but a dilution of risk. That is, the risk of damage to homes is spread out among all of the people who have insurance policies, and the premiums of everyone are used to pay the damages of those who have losses. The problem with diluting risk in Florida is that oceanfront homes are worth 50 to 100 times as much as homes located further inland. For every insured oceanfront home that is lost, the premiums of as many as 150 inland homes are used paying for the damages. Pick any coastal city in Florida and look at the home costs. A single family home on the oceanfront that sells for less than $1,000 per square foot is a steal. In Miami, single family oceanfront homes START at $20 million each.

Couple that with the fact that the vast majority of hurricane damage is within two miles of the coast. Insurance companies can’t charge $100,000 a year for insurance premiums, so they spread that cost amongst every homeowner in Florida. This can’t continue because it is mathematically impossible for the situation to stay as it is. Currently, I pay 1.5% of the value of my house each year to insure it.

If the state of Florida wants to fix the insurance problem in the state, they need to divorce the risk pool of oceanfront homeowners from the rest of the state’s homeowners. If you want to build and live in a $10 million home on the beach, fine. But make your insurance premiums 5% of the home’s value, but stop raising my insurance to cover for your house.

Categories: economics


Will · April 18, 2023 at 2:54 pm

Don’t forget that fraudulent roof damage claims has added to the problem. I’ve seen it many times in my own neighborhood.

Rick · April 18, 2023 at 4:01 pm

Consider the individuals who continue to live in the home the built on, say Marco Island back in the early 1970s.

They do not have a high income. Indeed, they built there because it was affordable at that time. Other locations were out of reach so they built on the sand amidst the scrub. No fault of that the real estate market inverted.

Consider Newport Beach, CA, or clifftop, ocean front in Laguna Beach, or the beach front in pretty much everywhere SoCal. It is difficult to imagine today but those places were desolate havens for the poors within one lifetime ago. Now those same properties fetch multiples of tens of millions of dollars. And a number are still occupied by the poors who built there because that’s all they can afford.

Government policymakers shoulder the majority of blame. Consider how difficult the permit process to construct – or even maintain – a seawall or groin intended to protect one’s property. Ask the people on the Outer Banks of North Carolina.

Then, consider that instead of icean storm surges, it is flooding rivers. There again the same problem with government rears its head.

I feel for any property owner. But the squabble should not be between ‘classes’ of property owners, but all against government overreach and meddling.

    Divemedic · April 18, 2023 at 7:40 pm

    I don’t know what part of Marco Island you’re talking about. Houses there are mostly in the millions. Average home price on Marco Island is over $4 million.

      Rick · April 19, 2023 at 10:41 am

      I was talking of those homes that are today valued at millions of dollars though they were not always valued so highly. Indeed, there was a time easily within one lifetime where those very same properties were what was then basically a shanty town.

      Example; my mother’s best friend since 4th grade built her current home of Marco Island. That was in the late 1960s. They built there because they could afford there.

      Since then, the real estate market has highly favored that location, hence the high valuations.
      The same has happened on beach towns in southern California.
      My late F-I-L, as a child and into early adulthood, lived on the beach in Ventura, CA. That was because it was all what his family could afford. Now, those same properties are valued at millions of dollars.

      There are many other such stories from around the nation; at ocean front, pristine lakes, river overlooks, forest glades, etc. Rather suddenly, their isolated ramshackle homes at those locations which was all the could afford now carry a high value in the market.

      So, back to your point, should those people who continue to live in those homes, who live in those high priced areas because, at the time they built it was cheap land, now pay to the insurance pool as if they are millionaires? The market value is realized only if they sell, or if they borrow against the property (which is dumb). Their wealth exists on paper only.

      [Side Note: Look into why Proposition 13 (Howard Jarvis) in California was passed into law.
      I contend that if the state requires insurance, the policy premiums constitute a tax. This since the full weight of the state is behind it.]

      Too, I did not make clear that a part of my original purpose was to illustrate that things are not as simple as you might have implied in your post.

        Don Curton · April 19, 2023 at 3:18 pm

        I’ll add my perspective. For most of my lifetime (born in 65), the town of Port O’Connor, Tx was a small, sleepy seasonal fishing camp. Ordinary middle class families could buy a small plot there and erect a plywood shack for a fish camp quite easily. Slowly, over time, the fish camps started getting nicer. Actual foundations, running water, septic systems, etc. were installed. People actually started living there full time as well. As a kid in middle school, I can remember helping my Dad’s friend calculate how many yards of concrete he’d need to pour his own patio slab for his fish camp. We all helped and he paid us in beer (even the kids!).

        Within the past 20 years, however, they started building really nice bay houses, some in the 100’s of thousands, some in the millions. There’s a canal system with an exclusive neighborhood. Outside of that neighborhood, today it’s not unusual to see a million dollar house next to a tar paper and plywood fish camp.

        Most of the people who’ve owned property there since the 70’s and 80’s are property rich and money poor due to the intense real estate market.

EN2 SS · April 18, 2023 at 4:08 pm

In my area, every single time there is a flood or hurricane or whatever, the ones living in the flood plain, on the coast, on the rivers, always cry about being damaged. Over and over and over. Asked why, it’s always “it’s so beautiful here”. Fuck’em.

anonymous coward · April 18, 2023 at 5:10 pm

Amen brother.

greg · April 18, 2023 at 8:56 pm

Same situation here in Colorado. I built my house in 2003 for 180k$. In 04″ insurance 1,100$ a year. Today, nearly 4,000$. So I got a agent who would insure for 1,500$ a year. Lowered the amount I’d get for total loose. But I could still replace structure for the new amount. Next problem is taxes have 3x increased. Sucks to pay rent forever to state and insurance company.

Elrod · April 19, 2023 at 2:41 am

” Insurance companies can’t charge $100,000 a year for insurance premiums…”

Actually, they could, and it would be reasonable to do so. Such pricing would reflect the true cost of both managing the insurance process and repair / reconstruction after a casualty event.

But….that would make them look bad, draw criticism from those who are incapable of understanding the basic economic principles behind the entire concept of “insurance” – and, unfortunately, a great many of those are on the user side of media keyboards – and government drones would, in the hidden name of “protecting the citizens” lambast such actions with vote-seeking proclamations.

I see no problem with business processes reflecting the true cost of doing business, and that does demand some flexibility. Grocery stores sell apples cheap to lure you in with the hope, and expectation, that while you are buying apples at a pennies each you’ll also buy some high-profit potato chips and beer.

The big difference is there’s no lender or government mandate to buy either apples or chips but there is to buy insurance..

    Steve · April 19, 2023 at 12:35 pm

    “But….that would make them look bad, draw criticism from those who are incapable of understanding the basic economic principles behind the entire concept of “insurance” – and, unfortunately, a great many of those are on the user side of media keyboards – and government drones would, in the hidden name of “protecting the citizens” lambast such actions with vote-seeking proclamations.”

    I doubt there would be much backlash if it were phrased as, “soak the rich” or better yet, “make the rich pay their fair share”. Because as DM explains, this is just a scam to make everyone else bail out the rich for their own poor decisions.

neomunitor · April 19, 2023 at 5:57 pm

Last time I checked, when the house within 2 miles of the beach get wiped out, the land is still there, you just have to rebuild the house. That costs the same whether it is there or 20 miles inland. Yes, the frequency of that rebuilding is more often, the damage is higher. Yes, the pool of that risk should be separate OR those people should pay much higher premiums to reflect that. But the value is in the land, not in the house itself unless the construction reflects that, and if it does, the premium would show that.

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