Why are so many insurance companies pulling out of providing coverage in Florida?
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Here is how it’s supposed to work. You pay for insurance. When something bad happens to your property, like it gets damaged in a hurricane, you make a claim on the insurance. Your roof has $10,000 in damages because a roofer told you that’s what it would cost to fix it, so you make a claim for $10,000. The insurance company looks at your roof too, says that seems right, and gives you $10,000. If this is the only damage/claim you have over 10 years and you pay $1000 a year for your insurance, then you and the insurance company had a fair deal. However, if five of your neighbors paid for the same insurance and the other four didn’t get damaged by a hurricane well, lucky for them and lucky for the insurance company who made pure profit by never having to pay out.
Now consider what happens if people start acting less than honestly. Maybe you have $10,000 of damages, but the roofer comes out and, feeling the pinch from a string of bad jobs or some unexpected costs, he inflates the price a bit saying it will cost $12,000. The insurance company takes a look and shrugs…might be a little bit higher than expected but it’s within a reasonable range, market rates and all that, let’s just pay it. The roofer smirks and decides well, I guess I’m going to charge a little extra whenever I know there’s insurance involved. And he does.
Over time, every contractor has this same experience. They all start charging more because why not. After all they are hardworking men and women out there roofing in the Florida heat and the insurance company has plenty of money. Screw them. Then the contractors start to get bolder. The insurance company always pays, right? Maybe you don’t need a new roof, just a repair…but the roofer says let’s tell them you need the whole thing done anyway. It’s a win/win. You get a “free” entirely new roof, I get a much bigger payday, and the insurance company will be just fine. So you make that claim. Maybe it doesn’t work. But one out of 10 times it does and it makes up for all the others, doesn’t it?
It keeps happening. Suddenly a water leak into the ceiling becomes an excuse to try and get insurance to fund a whole new kitchen renovation. Contractors are inflating prices by obscene margins. Somehow mold–something that is essentially unavoidable in a tropical state like Florida–becomes a toxic death sludge that warrants replacing your entire flooring with brand new hardwoods and maybe some new cabinets while we’re at it. Insurance keeps paying and paying until one day some guy at the top looks at the numbers and goes…uh oh. We are paying out way, way too much.
Then what happens? Insurance starts getting stingy. They double check everything. They crack down on fraud and they do it by refusing everyone. They don’t know who is scamming them so they have to assume it’s everyone until proven otherwise. They wield bureaucracy as a weapon. They start litigating. Insurance has tons of lawyers. Every lawyer saves them money so they hire thousands. They also start raising premiums because the cost of insuring people has gone up (sort of).
Except…now the people making honest to God real, meritorious claims are getting brow beaten into bad payouts. Or are getting denied outright. And they’re paying more premiums as well. It isn’t fair. So they lawyer up too. And the law says whichever lawyer wins gets to have their fees paid by the loser.
What happens then? The plaintiffs lawyers do the same thing as the grifting contractors. They inflate their bills. A homeowner gets an unfair denial of a $10,000 claim? Let’s quickly rack up $10,000 in legal fees and force the insurance to settle or spend twice that to fight it. Now insurance isn’t fighting against a $12,000 contractor bill inflated from $10k, their fighting a $20,000 claim with attorneys fees.
It becomes a war. Insurance doubles down. They fight harder in litigation. They reject more claims. They lobby and get the laws changed in their favor. The contractors keep inflating their costs because well, sometimes they still get them paid. The plaintiffs lawyers rush lawsuits into court in an attempt to get some fees incurred before insurance can offer to settle. They’re making plenty of money too, and so they fight even harder to win. The war escalates until litigation and all it’s time and extra cost is not the exception but rather the norm. Fighting and suing and accusing the other side of fraud or bad faith is just…part of the process. Now it takes months just to get a payout, if you manage to get one at all.
Meanwhile, regular people with no claims have no idea what is going on. They don’t see the war. They just see their premiums go up and up each year. And they hear all kinds of stories. Bobby’s insurance paid to renovate his entire kitchen. Betty’s insurance screwed her around for months while she had a hole in her roof.
And then on top of it all, on top of this big messy self-cannibalizing spiral of grifting and fighting and cost inflation that has nothing to do with risk distribution and everything to do with people just trying to get a little bit more than they deserve…you have climate change. More disasters. More flooding. Rising sea levels. Cost of insurance actually is going up, and it’s not just from rampant fraud. Not anymore.
How do we fix it? More regulation? State income tax on the wealthy to subsidize costs where needed? Pass laws that don’t exclusively cater to preserving insurance company profits and instead attempt to actually address the problem of claim inflation and bureaucratic bad faith? Are you kidding me?!? This is Florida. Republicans control everything and have for decades. And besides…those fixes all sound like they might not maximize our profits.
Time to cut losses and leave. This one isn’t getting fixed. That’s what the insurance companies decided, that’s what I did, and so should you if you are unfortunate enough to live in that god-foraken swamp state.
Tl:Dr Why Florida? Because everyone there is a piece of shit and has been for a long time.
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