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Sarasota homeowner Richard Lipov got an unpleasant surprise when he received his property insurance bill last month.

His insurer, Edison Insurance Co., had increased the premium from $1,000 to $1,545 for his home, which was built in 2003 and is valued at $360,000. Lipov said neighbors in his Villa Rosa subdivision and other friends in Sarasota were reporting similar increases. He reached out to his agent but had not heard back.

Edison was the first of several insurers in the state to apply for a rate increase. The Florida Office of Insurance Regulation approved a 21.9% average increase in December. The new rates go into effect Feb. 15 for new policies and March 24 for renewals, according to the Insurance Journal

Property owners throughout Florida are seeing their insurance rates soar, as companies had rate increases approved ranging from from 12% to 31%. Insurers point to high rates for reinsurance, which is basically insurance to back up insurers, and claims for water damage from leaks that are not hurricane-related.

Another factor cited was that claims still were rolling in from Hurricane Irma in 2017 and Michael in 2018. Policy holders have a three-year window to submit wind damage claims. Insured losses from Irma totaled $17.44 billion while Category 5 Michael generated $7.9 billion in claims for insured losses, according to FOIR.

Alexis Bakofsky, director of communications for FOIR, said the state’s insurance market is one of the most complex in the world.

“The market is currently facing significant challenges as the frequency of claims increases and those claims become more expensive,” Bakofsky wrote in an email. “These challenges are largely due to increased litigation, exacerbated by higher catastrophe claim losses as a result of multiple hurricanes over the past several years and rising reinsurance costs as a result of a hardening reinsurance market.

Sticker shock

The FOIR calendar has been full of hearings for property insurance increase requests. 

Some of the higher requests for average rate increases include:

  • Centauri, 31.9%, requested, pending; 
  • Southern Fidelity, 31.1% requested, approved;
  • Capitol Preferred, 26.2 requested, approved;
  • Edison, 21.9%, approved.

Insurers noted that the rate increases can vary based on the age of the home. A number of major insurers are scaling back coverage in South Florida or are dropping homes over 10 years old. Higher premiums and dropped coverage are forcing homeowners to seek policies from Citizens, the state-run company that was created to become an insurer of last resort.

Homeowners who have a mortgage are required to have property insurance. Some who own their homes outright choose to self-insure to avoid high premiums but would shoulder the full cost of repairs and rebuilding should their homes be damaged or destroyed by a hurricane or tropical storm.

Citizens balloons

Citizens Property Insurance has been trying to cull its rolls for years. Citizens peaked at 1.5 million policies in 2012 and had been trying to move policies back to private insurers.

But the stressed private market is forcing homeowners back to the state-run insurer.

A healthy number of policies for Citizens is considered to be 420,000 policies, which is about what it had in 2019. Citizens grew to more than 540,000 policies in 2020, accounting for about 5% of the market. 

“The growth is becoming extraordinary,” Citizens President and CEO Barry Gilway said at a Dec. 16 board meeting covered by News Service of Florida. “And you can gloss over these numbers, but the impact they have on the overall operations is significant.”

Carlos Beruff, the Manatee County homebuilder who is chairman of the Citizens Board of Governors, predicts that the insurer could grow to nearly 700,000 policies in 2021. He also called Citizens “the 800-pound gorilla” in Florida’s property insurance market.

Citizens is looking to increase its rates to discourage new growth, but the company’s rate hikes are capped at 10% per year. On Dec. 16, the board was scheduled to approve a request for an average 3.7% rate increase but decided to wait until a Jan. 26 meeting to make a final decision on a rate filing. The FOIR has to approve any rate increase.

“This is exacerbated because nobody’s leaving (Citizens) because there’s no capacity in the overall marketplace,” Gilway said at the board meeting. “We know that a healthy private market reduces Citizens’ size, and in an unhealthy private market we’re going to grow.”

Last year, Citizens received a statewide average increase of 8.2% for renters and for policyholders who own homes and condos.

Citizens is Florida’s second-largest insurer with nearly 472,000 policies and $962 million in premiums, as of June 2020. The state-run insurer trailed only Universal Property & Casualty Insurance, which had 696,207 policies totaling $1.151 billion in premiums, according to FOIR.

Like many property owners, Lipov said he was frustrated both with the amount of the increase and the lack of information he received about Edison’s rate hike request hearing.

“It would be nice if the Florida Office of Insurance Regulation offered some public transparency or outreach on these large increases so consumers would not be blindsided,” Lipov wrote in an email.

Bakofsky said the office is doing what it can to protect consumers.

“OIR thoroughly reviews all filed auto insurance rate filings to ensure they comply with applicable laws and are not excessive, inadequate or unfairly discriminatory,” she wrote. “OIR’s main focus is to foster a stable and competitive insurance market and make sure that insurance is available, reliable and affordable for Florida consumers.”