Opening the notification of the coming year’s homeowner’s insurance premium is not for the faint of heart in St. Petersburg, Florida. But, that’s about to change thanks to new rules for the insurance industry.
The average annual premium nearly doubled in 2022 compared to the rest of the country.
Legislators put measures in place aimed at increasing the number of insurance companies doing business in Pinellas County and beyond, thereby lowering the cost of insurance.
The effects of the new rules will lag slightly behind the current rising costs of insurance premiums in the Tampa Bay area.
Lawmakers held a special session earlier this year creating CS/SB 2D, which goes into effect July 1, 2022, intending to attract more insurance providers to do business in the state, thus lowering the cost of insurance in a larger market.
It also contains measures to tamp down frivolous lawsuits against insurance companies and provide significant relief to homeowners through the Reinsurance to Assist Policyholders (RAP) Program.
What’s behind higher homeowners insurance in St. Petersburg?
Indeed, homeowners still feel the effects of Hurricane Michael’s landfall in October of 2018. The category 5 hurricane left billions of dollars in damages in its wake.
That’s a piece of the insurance hike puzzle.
Insurance rates fluctuate based on the frequency of claims in any given area. So even if you don’t suffer damages, your premium will predictably rise with everyone else’s. In areas prone to lightning, hurricanes, and even tornadoes, insurers expect to receive more claims and spend more, so they pass the costs along to their customers.
Beyond the weather, another storm hit insurance companies in St. Pete; the flurry of lawsuits filed in civil court. One particularly costly example of contractors acting in bad faith was a ruse where roofers would have homeowners sign an assignment of benefits letter. That allowed roofing companies to take complete control of the insurance claim. The fraud came in when those companies inflated the cost of repairs and then sued the insurance company only to settle on what should have been the reasonable price, to begin with. The price of legal fees gets passed on to the customer.
The breakdowns in supply chains led to a severe shortage of building materials. Ports overflowing and shipping freight stranded outside their destinations created months-long delays. Those who could source builders with in-stock materials faced higher costs, raising the total amount of insurance claims. The inevitable long wait for repairs or building replacement spelled havoc on homes.
What will changes contained in CS/SB 2D do for homeowners?
Legislators believe the new rules will lower insurance premiums by attracting more insurance companies to do business in Florida. More competition means driving prices down to attract clients.
Lawmakers packed a lot into this bill, including:
- $2 billion reimbursement layer of reinsurance for hurricane losses right below the Florida Hurricane Catastrophe Fund (FHCF) layer
- The Reinsurance to Assist Policyholders (RAP) program is to reimburse 90% of each insurer’s covered losses and 10% of their loss adjustment expenses. (based on limits of coverage for the two most costly hurricanes in a contract year)
- Insurance companies don’t pay premiums for RAP coverage but have to reduce rates to reflect savings. That reduction is to be in place by June 30, 2022.
- $150 million from the state’s General Revenue Fund was placed in the My Safe Florida Home Program to provide hurricane mitigation inspections and matching grants for hurricane retrofitting homes.
- Roofers face third-degree felony charges for insurance fraud for paying or waiving a client’s insurance deductible or filing a claim with fraudulent or even misleading information.
- Insurance companies have to include a separate roof deductible in policies which can be declined at the policyholder’s discretion.
- When a roof deductible is applied in an insurance claim, no other policy deductibles can be applied on top of that.
- Fewer people and entities can get attorney fees through a lawsuit, while insurance companies have increased opportunities to have their attorney fees covered by the other party.
- Prohibits any insurance company from refusing homeowner policy coverage because of the age of the roof (insuring a residential structure with a roof less than 15 years old.
- Several sections require insurers to be more transparent in communications with customers.
The savings will not kick in immediately on July 1, but once insurers see the price of doing business in west-central Florida dropping plus beefed-up measures to prevent fraudulent claims, costs to consumers are expected to fall.
What can I do in the meantime?
Get busy calling for quotes from competing insurance companies and watch for new companies doing business in the market.
Insurance insiders say bundling home and car insurance together often provides significant savings.
Schedule a policy review with your agent. Insurance needs change over time. Because no matter what type of storm hits, wind damage is often the most damaging culprit, so be sure you know what wind protection in your policy covers both exterior and interior.
Talk to your agent about raising your deductible. Paying more out-of-pocket after a disaster may feel like a headache, but saving on your annual premiums over time will pay your deductible through savings on your bill. Have your agent run multiple scenarios, such as a $500 deductible raised to $1,000 versus a hike to $2,000. The best savings may come from smaller increases in your deductible!
Rolling your annual homeowners insurance into your mortgage escrow doesn’t lower the insurance cost, but it does let you pay it out over 12 months rather than in a lump sum.
Final thoughts
Homeowners here may find that a reality check is helpful when facing higher insurance costs. For example, people in other states pay double to nearly triple the amount of insurance premiums Floridians enjoy.
Oklahoma, Nebraska, and Kansas are the three most expensive states in the cU.S. for homeowners insurance.
Most homeowners in St. Petersburg accept that paying insurance premiums are part of the price of living in paradise.