Home Owners living in Coastal states are finding it harder to find affordable home owners insurance. No one has been more affected than the state of Florida. Apparently the back lash against insurance companies has gotten so great that the Florida state legislature approved in January a measure aimed at reducing premiums offered by private insurance companies by 5-25%.

For those of you do not know, the insurance industry is heavily regulated. Any request to raise rates has to be approved by the state. In fact, a few insurers recently requested an increase in Florida rates by as much as 40%! Keep in mind that Florida was devastated by multiple hurricanes in 2004 and home owners policies were either canceled or increased between 50-100%. I should know, I lived through Hurricane Ivan, a Category 4 storm that hit my town of Pensacola head on. My rate in 2004 for our home was $2000 per year. It is now $6000 per year! It has gotten so bad that the big companies like State Farm and Allstate will not write any new policies in Florida. From what I have heard, they have also cut out Louisiana and Mississippi since Hurricane Katrina. A lot of home owners now must find help from the state run insurance company Citizens. You want to know why some states have had their real estate markets bust? It doesn’t really have to do with overpriced homes, but more to do with lack of insurance choices. If you cannot get insurance, the lender will not underwrite the loan, and buyers cannot purchase a home. If you are a lower income family, there is no way you can afford to buy a home in Florida.

So, what’s to be done? Some states are investigating whether insurance companies are maneuvering to go around rules that make sure homeowners everywhere, including coastal state get coverage. California recently won a fight with several large insurers who agreed to cut back rates as much as 20% for a total of $439 Million. Many insurance companies have been making huge amounts of profit from their premium increases and some states don’t like it. Insurance companies have come out saying they will not offer insurance in the state if they are regulated to cut profits. The states, like Florida for instance, have responded by proposing a bill that says if insurers write home and auto policies in other states then they must offer home owners insurance in Florida, or be banned from selling any other type of insurance in the entire state.

According to an article from the Wall Street Journal Online here are a couple things happening in other states:

  • Connecticut: Attorney General is investigating 10 insurers seeking to require coastal homeowners to install storm shutters that can cost $50,000 before they will issue coverage
  • Mississippi: State Farm just lost a lawsuit by homeowners alleging the company wrongly denied their claims by contending their home damage was caused by flood waters instead of wind.

What do you think about the regulation of the insurance industry? Do you have any experiences like these you would like to comment on?