Rising insurance costs have been a concern for commercial property owners in Florida for years. According to a new study, insurance rates could increase by 45-50%, and some property owners could see their premiums double.
What is driving these cost increases?
Decreasing competition leads to higher rates
Large payouts from insurance carriers due to weather-related losses, such as hurricane damage, caused some insurance carriers to go out of business. Additionally, storms, such as Hurricane Ian, which have cost insurance companies billions of dollars, make the remaining carriers reluctant to provide coverage in the state. Because there is less competition, many of the insurance companies that are still operating in Florida are increasing their rates.
Increased risks caused by climate change are also driving rates up. States that are seeing an increase in powerful storms and other severe weather due to climate change are experiencing rate increases.
Legislative attempts to address the issue
Florida legislators have attempted to address rising costs by making it more difficult for property owners to sue insurance companies. Despite their hope that making the state more friendly to insurance companies would increase competition, prices have continued to go up. Industry experts are now calling for lender reform.
Many lenders require property owners to fully insure their property, even though catastrophic losses rarely occur. As an alternative to removing this requirement, some experts suggest that insurance companies should base rates on the actual probable maximum loss, instead of the full value of the property.
Either way, commercial property owners should plan for higher costs in the coming year.