Florida lawmakers are forcing homeowners to buy flood insurance

Hundreds of thousands of Florida property owners face a requirement to buy flood insurance under a landmark bill approved Wednesday by the state Legislature. This is the first such mandate in the country.

The requirement applies to properties across the state, regardless of whether they are in high-risk flood zones, and will cost some homeowners thousands of dollars a year.

The bill was approved two months after Hurricane Ian caused catastrophic damage in parts of Florida where almost no one has flood coverage (Climatewire, October 1). Supporters say the requirement could protect people whose homes are damaged by storms from financial ruin because flood coverage isn’t typically included in standard homeowner’s insurance policies.

“It’s probably a good idea to require people to have flood insurance,” said Paul Handerhan, president of the Florida-based Federal Insurance Reform Association, a consumer nonprofit. “That seems to be the only mechanism that really drives adoption.”

The requirement comes as federal lawmakers and officials scramble to get more homeowners across the country to buy flood insurance and protect themselves financially from climate change.

Federal law requires people to have flood insurance on property in a flood zone if it is secured by a federally insured mortgage.

However, many people ignore this requirement, and fewer than 4 percent of households nationwide have flood coverage through the National Flood Insurance Program, which is administered by FEMA and is the primary provider of flood coverage in the US.

In Florida, the nation’s most flood-prone state, 19 percent of households have flood insurance. This is the second highest rate in the US after Louisiana. However, 7 million households in the state do not have flood coverage.

Florida’s flood insurance requirement was included in a sweeping bill approved by the state Legislature during a special session this week to revive the state’s crumbling insurance sector.

Dozens of local insurers have gone bankrupt this year or stopped covering property damage amid mounting losses. That forced hundreds of thousands of Floridians to buy policies through the state’s insurer of last resort, Citizens Property Insurance Corp., while making Florida the most expensive state in the country for property coverage, according to the Insurance Information Institute (ClimatewireJune 22).

The bill includes provisions long sought by the insurance industry to reduce losses, including one aimed at discouraging policyholders from filing lawsuits to challenge settlement offers they deem inadequate.

“This is landmark legislation for Florida,” said Mark Friedlander, a spokesman for the Insurance Information Institute.

Friedlander said the bill would help both the state’s insurance industry and homeowners.

“It can be a financial burden for some families, but at the same time, if you’re completely devastated, how are you going to recover from flood-related storm damage if you don’t have coverage?” Friedlander said.

The bill cleared the Republican-controlled Legislature largely along party lines and goes to Gov. Ron DeSantis, a Republican, who is expected to sign the measure. The flood insurance provision drew little opposition or comment during three days of debate and voting.

The requirement only applies to property owners who have coverage through Citizens Property Insurance, which has become the largest property insurer in the state. Citizens covers 1.2 million properties – nearly three times the number it covered three years ago. All policyholders will be required to purchase flood insurance regardless of whether they are located in flood prone areas. The requirement will be phased in over the next four years, starting in April with people who own properties in a flood zone.

Citizens policyholders can avoid the mandate by surrendering their policies and purchasing property coverage through a private sector insurer.

That’s partly what the Florida Legislature intended, said Thomas Cotton, who owns Hugh Cotton Insurance Agency in Orlando.

Lawmakers want to encourage people to buy coverage through the private sector to “depopulate” citizens and help rebuild Florida’s property insurance industry.

“How are we going to get capital into the market when a government-subsidized enterprise is their competition?” Cotton said.

Another goal, Cotton said, is to avoid conflicts between citizens and policyholders over whether storm-related property damage was caused by extreme winds or flooding. Homeowners and other insurers sometimes deny claims after a storm because they say the damage was caused by flooding that wasn’t covered by their insurance policies.

“The point of a Citizens policyholder having a flood policy is that it eliminates the litigation that would follow,” Cotton said.

It remains to be seen how many civil policyholders will purchase flood insurance and how many will avoid the requirement by switching to a private sector insurer.

The Insurance Institute’s Friedlander said homeowners who live outside flood zones will only have to pay a few hundred dollars for flood insurance, which will be cheaper than giving up their citizen policies and buying insurance from a private company.

“If you intentionally leave Citizens because you don’t want flood insurance, you’re going to pay a lot more,” Friedlander said.

Handerhan, of the insurance reform group, said he hopes homeowners will buy flood coverage even if they live outside flood zones and don’t think they’re at risk.

“Wherever you live in Florida, you may be at risk of flooding,” Handerhan said. “People, when left to their own devices whether to buy flood insurance, often don’t. It is difficult for them to understand the risk of a low-probability, high-severity event, thinking that it will never happen to them. But then it often happens.

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