Florida Considers Socialist Model to Combat Soaring Insurance Costs

Florida lawmakers looking to tackle the insurance crisis in the state are considering allowing state-backed Citizen Property Insurance to cover more homes following the exodus of some 15 major insurers in the past couple of years.

The cost of home insurance has ballooned in the Sunshine State in recent years, with Floridians paying on average $6,000 in 2023—the highest premium in the entire country—according to data from the Insurance Information Institute. Insurance costs have grown by 102 percent in the past three years alone, according to Triple I.

The increased risk of damage posed by more frequent and more extreme weather events, the growing Florida population and the number of claims in the state have led several insurance companies to leave the state, exacerbating an already bad situation.

Calls have grown in recent months for Florida Governor Ron DeSantis and the state legislation to do something to tackle the ongoing crisis. On previous occasions, DeSantis' spokesperson told Newsweek that the Republican had already acted to alleviate costs for Florida homeowners, but these measures will take time to show results.

In December, DeSantis unveiled a proposed budget that would include cutting property insurance taxes. Newsweek reached out to DeSantis' spokesperson for comment via email on Monday.

Florida lawmakers promised to tackle the crisis at the legislative session in Tallahassee, which is scheduled to start on Tuesday, with some measures that would traditionally be considered that of a socialist welfare state.

Among the proposed solutions filed in previous legislations is introducing direct subsidies to struggling policyholders, lowering reinsurance costs, and, crucially, allowing the not-for-profit Citizen Property Insurance to cover more homes, Tampa news station FOX 13 reported.

The measure would help those homeowners left without coverage by the departure of private insurers, though the company is generally considered an insurer of last resort. Citizen Property Insurance only steps in after a homeowner is refused coverage by a private insurance company. It currently insures about 1.3 million policyholders in Florida.

While many of these proposals, most of them introduced by Democrats, have not been previously allowed to pass by Republican lawmakers, the idea to expand the Citizen Property Insurance's coverage was sponsored by Representative Jim Mooney and Senator Ana Maria Rodriguez, two Republicans.

The two South Florida lawmakers are proposing to increase the cap on the value of homes that Citizen Property Insurance can cover in Monroe and Miami-Dade counties. According to their proposed bill, the state-run insurer could cover homes valued at up to $1.5 million instead of the current $1 million. Annual rate increases in the two counties would be capped at 10 percent.

Charles Nyce, department chair and a Dr. William T. Hold associate professor of risk management and insurance at Florida State University, told Newsweek that he doesn't believe solution to be "feasible."

He said: "It appears from my reading of the bill, that it would have Citizens selling insurance below actuarially fair rates, it would undermine any private insurance company being able to compete and continue to add liabilities to the State of Florida's balance sheet."

According to Nyce, some of the legislative changes that were made last year "have already started to have positive effects on the private insurance market," leading to the formation of a number of new companies which have begun taking policies out of Citizens.

"It was well documented that it was going to take time for the changes to lead to lower rates," he added.

The proposed solution also comes as the U.S. Senate Budget Committee announced the launch of an investigation into whether Citizen Property Insurance has enough funds to meet a potential increase in damage claims linked to future extreme weather events.

The concern is that an insolvent Citizen Property Insurance might cause millions of Florida policyholders to pay more, even if they're covered by other private companies—something that is permitted under state law.

Committee Chair Senator Sheldon Whitehouse, a Democrat from Rhode Island, said there's also concern that all American taxpayers will suffer if a struggling Florida should look to the federal government for emergency relief, CNN Business reported.

Update, 1/9/24 4:00 a.m. ET: This article was updated with a comment from Charles Nyce.