Will Stabilizing Florida's Home Insurance Market Help Flood Insurance Take-Up?

Florida homeowners are set for another increase in their insurance premiums after Citizens Insurance confirmed a 14% rate hike last month.

The latest rise aims to stabilize Florida’s insurance market and reduce the financial burden on the state’s insurer of last resort. Citizens has also become the largest property insurer in Florida, holding about 14% market share, though it has been actively transferring policies to private insurers in recent months.

Florida’s Insurance Challenges Continue

Florida’s unique geography presents some significant challenges for residents and insurers alike. With much of the population living along the coast, this hurricane-prone region grapples with the dual threats of wind and flood damage.

But as storms become more frequent and intense, an increasing number of homes are becoming uninsurable by private insurers, pushing homeowners towards Citizens.

Neptune Flood CEO Trevor Burgess (pictured) told Insurance Business that long-term policy changes would be necessary to solve Florida’s insurability crisis.

“The real issue is a complex policy discussion around climate change, insurability, and whether we should invest in making these houses more resilient or consider if people should live in these vulnerable areas at all,” Burgess said.

“Should we spend billions to harden homes or build infrastructure to reduce hurricane impacts? These are hard questions. Raising insurance prices for Citizens Insurance might help it survive a major storm in the next few years, but it doesn’t solve the underlying issues.”

Flood insurance is increasingly needed for coastal communities in Florida amid the frequency and severity of hurricanes, yet only 13% of Floridians carry the coverage, according to the National Flood Insurance Program (NFIP).

For many homeowners, adding a $1,000 flood insurance policy becomes untenable when their home insurance jumps from $1,500 to around $6,000, which is now the average annual cost of home insurance in Florida, according to the Insurance Information Institute (Triple I).

Stabilizing the Florida Insurance Market

According to Burgess, increasing competition may be key to mitigating costs for Florida homeowners, allowing them to access the flood coverage they need.

“Stabilizing Florida’s homeowners’ insurance market and bringing in more competition should help reduce these prices in the long run, making flood insurance more affordable,” the CEO said.

Other reforms, such as updating flood maps, are also critical to bridging the insurance gap. Burgess pointed out that current flood maps are often decades old and don’t reflect current climate realities.

“FEMA and municipalities need to work together to update these flood maps quickly. The science is clear on which areas are at risk, but the maps are outdated,” he explained. “For example, Broward County is updating its maps this Fall, adding nearly 100,000 buildings to high-risk zones, requiring flood insurance. Both federal and local levels need to invest in accurate floodplain measurement and management to produce new maps.”

Educating insurance agents about flood insurance is also critical.  Historically, agents only sold flood insurance when legally required for high-risk homes with mortgages. Insurers are looking to simplify the process, making it easy for agents to offer flood insurance with every home sale.

“If you’re in a low-risk home, flood insurance might only cost a couple hundred dollars a year,” said Burgess.

This ease of access has allowed private insurers to grow quickly, but not fast enough to compensate for the shrinking National Flood Insurance Program (NFIP). “We’re making up for some of the difference, but it’s going to take time to change agents’ behavior,” said Burgess. “There’s no easy solution. But we must face these difficult questions head-on if we’re to create a sustainable path forward.”