AAA pulls back from offering insurance in Florida, following Farmers

AAA is not going to renew the auto and residential insurance coverage insurance policies for some prospects in Florida, becoming a member of a rising listing of insurers dialing again their presence within the Sunshine State amid a rising danger of pure disasters.

“Sadly, Florida’s insurance coverage market has turn into difficult in recent times,” the corporate mentioned in an announcement emailed to CBS MoneyWatch. “Final yr’s catastrophic hurricane season contributed to an unprecedented rise in reinsurance charges, making it extra expensive for insurance coverage firms to function.”

AAA declined to say what number of prospects will not have their insurance policies renewed, saying solely that the change will have an effect on “a small proportion” of coverage holders.

The corporate is the fourth insurer over the past yr say it’s backing away from insuring Floridians, an indication excessive climate linked to local weather change is destabilizing the insurance coverage market. Farmers Insurance coverage just lately mentioned it is going to not provide protection within the state, affecting roughly 100,000 prospects. 

Farmers mentioned the transfer will have an effect on solely company-branded insurance policies, which make up about 30% of its insurance policies bought within the state.

Bankers Insurance coverage and Lexington Insurance coverage, a subsidiary of AIG, left Florida final yr, saying current pure disasters have made it too costly to insure residents. Hurricanes Ian and Nicole devastated Florida in 2022, inflicting billions of {dollars} in harm and killing a complete about about 150 individuals.

Below Florida legislation, firms are required to provide three months’ discover to the Workplace of Insurance coverage Regulation earlier than they inform prospects their insurance policies will not be renewed.

Hovering house owner prices

Already, owners within the state pay about 3 times as a lot for insurance coverage protection because the nationwide common, and charges this yr are anticipated to soar about 40%. 

Insurance coverage firms are leaving Florida at the same time as lawmakers in December handed laws geared toward stabilizing the market. Final yr, Gov. Ron DeSantis signed a legislation that, amongst different issues, creates a $1 billion reinsurance fund and places disincentives in place to stop frivolous lawsuits. The legislation takes impact in October. 

AAA mentioned it is inspired by the brand new measure, however famous “these enhancements will take a while to totally materialize and till they do, AAA, like all different suppliers within the state, are compelled to make powerful selections to handle danger and disaster publicity.”

Insurers are staging the same exodus in California, the place AIG, Allstate and State Farm have stopped taking up new prospects, saying that wildfires are driving up the prices of underwriting insurance policies. Scientists say local weather change has made the West hotter and drier over the past three many years and can proceed to make climate extra excessive and wildfires extra frequent and harmful.

In line with knowledge compiled by the industry-supported Insurance coverage Data Institute, California has greater than 1.2 million properties in danger for excessive wildfire, excess of some other state.

Insurance coverage premiums are additionally rising in Colorado due to wildfire dangers, and an Oregon effort to map wildfire danger was rejected final yr due to fears it will trigger premiums to skyrocket.