AAA has stated it will no longer renew specific auto and home insurance coverage in Florida, citing the state’s catastrophic natural disasters resulting in “unprecedented” reinsurance rate increases.
Describing the Florida market as particularly challenging in recent years, AAA pointed to a devastating 2022 hurricane season that escalated the costs of operating for insurance companies.
“Consequently, we made the difficult decision to not renew a very small percentage of higher exposure homeowner’s policies,” a spokesperson remarked. She noted that the Florida-based insurance provider is not exiting the state and encouraged those affected to collaborate with their AAA insurance agents to identify alternative coverage options.
The announcement arrives shortly after Farmers Insurance disclosed plans to withdraw its auto, home, and umbrella policies in Florida. This adds to a growing list of insurers reassessing or curtailing coverage in states severely affected by natural disasters.
While Florida may be experiencing a population boom due to its advantageous tax incentives, its susceptibility to extreme weather events has caused its homeowner insurance premiums to soar above the national average.
“If you’re experiencing losses in these markets, the natural response is often to withdraw,” commented M. Thomas Martin, president of the Homeowners Consumer Center. He highlighted that although companies might face losses in winter in states like Illinois, Michigan, and New York, “they aren’t catastrophic losses like those occurring every one to eight years in Florida.”
Insurance providers tend to be risk-averse; however, this does not necessarily result in a complete abandonment of coverage in hard-hit regions, according to Martin. He reflected on the political pressure on insurers to remain in Louisiana after Hurricane Katrina in 2005, stating, “They did not all withdraw then.”
The aftermath of Hurricane Ian, which inflicted severe damage on Florida’s coastal areas such as Fort Myers last September, appears to have prompted critical reevaluation among some insurers. “I think Ian made insurance companies reconsider their exposure,” noted Martin.
A Farmers Insurance spokesperson stated that their decision to eliminate particular offerings was essential for managing risk exposure and applies solely to policies issued through its exclusive agency distribution channel.
“Importantly, this will not affect 70% of policies currently active in Florida, particularly those by Bristol West, Foremost Signature, and other brands,” the spokesperson clarified. Affected customers will be notified about their coverage status and provided with replacement options.
The circumstances also come in the wake of State Farm’s decision to halt new applications for business and personal property coverage in California due to historical surges in construction costs, escalating catastrophe exposure, and a tough reinsurance market.
Additionally, coverage restrictions or suspensions are being observed in various states, including Louisiana, where twelve insurers have left the market entirely, as reported in a recent article.
As extreme weather events become more frequent, experts suggest homeowners prepare strategically. “One of the simplest methods for homeowners in flood-prone areas to enhance their protection is to obtain federal flood insurance through FEMA,” Martin advised.
