We Went To Florida: The Housing Insurance Crisis Will Shock You

We got told we had to move in a hurry. Times of distress I have a tendency to be rather sarcastic because I always say I'd rather laugh than cry and that was kind of a one of those situations where you're literally throwing all your belongings to the street at one time. You're not being evicted and your wife's not kicking you out of the house. Maurice Gutierrez lived in Naples, Florida. His house flooded in 2022 when Hurricane Ian made landfall on the southwest coast of Florida. One of the strongest September hurricanes to strike the U.S. in decades. Significant storm again a category four. The street will never be the same. You know trees gone, neighbors gone, homes are gone and here I am today rebuilding because I won't move. I love this place. A year later Maurice got a notice from his insurance company. They were doubling his premium to $7,500 a year. The year after that it was up to a staggering $9,000 a year. Now on a fixed income retiree that's not chump change. So Maurice decided to drop his wind coverage. Now he's one of hundreds of thousands of Floridians that are going bare. That means they're living with little to no homeowner's insurance in a state that is set to have a record hurricane season this year. And what's going on in Florida under Governor Ron DeSantis is a warning. This is what happens when government capitulates entirely to the insurance lobby. We went to Florida to talk to other homeowners like Maurice. We found out that residents are being priced out of coastal communities and sketchy insurance companies are thriving under DeSantis's policies. It's essentially trickle down economics but for insurance companies. And the housing insurance crisis isn't just a problem in Florida. People around the bay and across the state are now being told their homeowner insurance policies will not be renewed. State Farm says they're discontinuing coverage for some customers. Several major carriers are pulling out of Iowa and other states. Experts warn the collapse in the homeowners insurance industry could take down the entire housing market with it. Should those systems start to collapse or should that business model collapse it could take down the entire American economy with it. It could take down the global economy. The water came up to this line right here. At first it's like it can't get much worse. It can't get much worse. And then it's like oh my god when is it going to stop. Maurice has lived in Florida for most of his life. Raised in Miami so hurricanes to us are as far as I'm concerned a weather event. You know it's coming. You prepare. You don't get complacent but you get used to them. Nearly one out of five Floridians is like Maurice. They've been forced to cut back or go without insurance. That option allows me to manage my own risk. Okay let's back up and talk about how insurance actually works. Insurance companies determine premiums for you based on risk assessment. Generally speaking the higher the risk the higher your premium goes. They assess risk factors like the quality of building materials in your house, your neighborhood, what kind of dog breed you own, and of course natural disasters. So you know if you have a wildfire risk in California and a hurricane risk in Florida those two things are supposed to balance themselves out. But as the planet warms and natural disasters increase the insurance business model hasn't been keeping up. And what's happening is that the risks of some of those perils of climate driven perils in particular are increasing so much that the insurance companies are having a difficult time making the profit that they've always expected that they will make. In response major national carriers are raising rates and cutting policies. Today 12 percent of people in the United States don't have homeowners insurance. Up the coast in Fort Myers Florida is Priscilla O'Hara. Hi I'm good how are you? She stayed in her home during Hurricane Ian just like Maurice. My son and I stood at the front door looking out the glass window and watched the rivers right over there. Watched the water coming up and here it's coming nothing we could do. Here it's coming and then the wind changed in about 10 feet from the Her roof was damaged but when she filed the claim her insurer State Farm told her that her policy didn't cover wind. I don't think we really realized that we were not covered for wind damage did not know that. I mean hurricanes are wind. The next year State Farm dropped her. They said her house which was built in 1976 was too old to insure. I've been with them for 40 years probably was a total shock. Yeah okay this goes back well he paid this on in September of 2022 $881. So I mean they had our premiums all those years went in their bank account. State Farm ended that year with a net worth of 131 billion dollars. Like a good neighbor State Farm is there. The roof damage cost her over six thousand dollars which she paid out of pocket. Okay you can tell a little bit there's a little different shade cost of $6,292. $6,292 to have it replaced. Priscilla shopped around but she couldn't find an insurer that she trusted. I want a company that I know something about not some company I've never heard of before. That seems smart. Yeah if we had that roof damage I could do it again I guess. Don't want to but I guess I could. So what exactly happens to someone if they don't have insurance? If you don't have insurance for your home you might lose your mortgage or you might face higher mortgage rates and worse if you have a disaster and your home is uninsured then you lose the value of that home or you face that out-of-pocket cost to repair that house which could be hundreds of thousands of dollars or more so it can be absolutely bankrupting. Priscilla and Maurice have both paid off their homes but if you have a mortgage you have to have homeowners insurance. So for people who can't find insurance Florida has something unique. A state-run not-for-profit backstop that is actually the number one insurer in the state. Citizens Property Insurance. Citizens Property Insurance. The state-run insurer called Citizens Insurance. Citizens Property Insurance was established in 2002 10 years after Hurricane Andrew hit Miami. It's absolutely for sure no question about it it is going to happen tonight. Hurricane Andrew was at the time the costliest hurricane in Florida's history and it hit the insurance industry hard. And the state was facing the prospects of incredibly precipitous economic decline and they wanted to avoid that. In 1992 Miami was a city of almost two million people. Lawmakers didn't want to see the city decline so in 1993 they held an emergency legislative session and created what would later become Citizens Insurance. And it was wildly successful. It did provide insurance to people who couldn't buy it on the commercial market but more importantly it reversed the flow of people leaving the state. It canceled the possibility of that exodus and it led to enormous growth. Citizens was supposed to be the insurer of last resort but then the state was hit with a record hurricane season in 2004 and again in 2005. As more parts of Florida became uninsurable Citizens expanded to protect more homeowners. Now 1.2 million Florida residents have public instead of private insurance. This backs up is important. If you start to lose insurance in a community then the home values will drop as a result of that and as those home values drop you'll see people start to move away from that community and the tax base decreases and as the tax base decreases you have less money for schools you have less money for infrastructure and fixing potholes in roads and so on and you start to see this sort of spiral of decline this negative momentum. A study from the Environmental Defense Fund calculated where the most money could be lost in tax revenue due just to increased risks of flooding. Homes in coastal Florida they determined could be overvalued by as much as 10 billion dollars a year. And this whole video you're thinking well luckily I don't live in Florida. Here's the national map. But the public model has a major flaw. It's put more people in the path of risk so it's increased their economic vulnerability. But it's also affected the way Americans vote. It's affected climate policy on a state level and on a federal level because constituents are not expressing urgency to enact policy to address climate change to lower those risks because they don't feel those risks. None of this has stopped people from moving to the coasts. In 2023, a year after Hurricane Ian's devastation, Lee County's population still grew. But the people who have been able to rebuild and afford their homes has changed. Fort Myers Beach is a coastal island just west of Fort Myers. It's been a popular resort town and home for retirees since the 1950s. Ian was the costliest hurricane to ever hit Florida. The Category 4 storm did 112 billion dollars in damage and Fort Myers Beach was one of the hardest hit. A third of the homes on the island were destroyed. But the town is rebuilding. Everywhere you look there are cranes and scaffolding and large RVs where former residents were staying. We met with Lori Curry, a real estate agent who has sold property on the island since 2004. I think when you drive here you see the obvious changes from its original days when it was mainly a retirement community and a little less affordable for some of the original owners. Lori says a lot of the smaller retiree homes that were built in the 50s and 60s were damaged and they're being replaced by rentals bought by wealthy investors. The people that came and bought at a discounted price, they knew what they were doing. Many former residents struggled to rebuild. A report from Bloomberg said the building on Fort Myers Beach, especially with the new federal and state building codes, can easily start at a million dollars. Eight out of ten homes sold the first year after Ian were purchased with cash. It turned out that Lori and her husband had their own fight with their insurance company after Hurricane Ian. They'd had roof damage and initially their insurer, Edison, wouldn't cover it. They ended up taking the company to court. They fought us tooth and nail the whole way. So that's the mentality of the insurance companies. You know, they like to take your money but they don't like to pay it off when there's a risk involved. Lori and Ron say they Because they had an attorney, they were able to get a new roof and the cost of the attorney and public assessor was covered by Edison. And that's the problem is some people are very reluctant and reticent and they are still suffering. Oh yeah, there's a lot of foreclosures. They're walking away. So Fort Myers Beach is an extreme example, but Florida is in the middle of a housing crisis and rising prices are impacting renters and first-time homebuyers the most. We have been in You might think the role of the public option, citizens, would be to keep these costs down, but there's a problem with that. Since the creation of Citizens Property Insurance, the insurance lobby has pushed to keep rates high. The emphasis should always be to try to get those people into the market where they're paying the full rate and not counting on their neighbors to pay part of the tab for them. The state initially required that citizens be non-competitive, even as insurance companies kept raising rates more and more. The insurance industry used to love citizens, right? They loved the idea of a last resort insurer where they can just sort of like leave the dregs, the most risky and unprofitable claims off on the public while doing the rest of the stuff themselves. In 2007, after those record hurricane years, the state changed the rules. Citizens didn't have to be more expensive than private carriers. Right now, these private companies are taking on all the safe risks where they have assured a profit and passing all the bad risk onto the state via Citizens Property Insurance Company. The insurance industry hated that. If you're in South Florida and you can get citizens coverage at 30 to 40 percent less than the private market, you're going to do that. In 2022, Ron DeSantis caved to the insurance lobby. And we have to create an environment where people want to come in and compete for your business. You can't dump everybody on Citizens Property Insurance. The Florida legislator passed a series of bills that would overhaul insurance law, and Ron DeSantis started depopulating Citizens Insurance. The goal was to kick people off of the insurer of last resort and get them back into the private market. But with so many major insurers denying coverage, customers are stuck with companies that are a lot more risky. Yeah, particularly in the last 10 to 15 years. National, large national insurers, the kind that you would recognize from commercials, have pulled way back for the most part. And in their place are companies called domestics. These are smaller in-state companies that tend to have far fewer resources. They aren't nearly as well capitalized. They're heavily reliant on reinsurance, which is insurance they buy for themselves. DeSantis is trying to get new companies into the state, but he isn't being very discerning. Enter Slide Insurance, a startup founded by one of the lawyers for Enron. Yes, that Enron. I knew that there were going to be mass insolvencies in Florida. So we raised a tremendous amount of capital to really kind of capitalize on market opportunities and provide new solutions to the homeowners. The CEO of Slide Insurance, Bruce Lucas, was thrilled about DeSantis' changes to insurance laws. The new bills made it harder for customers to sue insurers over unpaid claims. It created a bigger fund of reinsurance to protect insurers. That's the insurance for insurers. And most important, it handed Slide Insurance more customers. The Washington Post reported that businesses like Slide can cherry pick the policies they want, choose the properties that have the lowest amount of risk, and reject the ones in flood or hurricane-prone areas. Lucas laid it all out on a podcast called The Insurance Guys. You get to cherry pick the policies. Correct. You are underwriting and cherry picking the best policies, leaving kind of the worst ones there. Sometimes policyholders don't even know they're being pushed off of their plans. As long as the new policy is less than 20% more than Citizens Premium, they can be forced off of their policy. You know, you send out these notices and it gets mixed in with everybody's junk mail. In the trash can it goes. Next thing you know, you've got 200,000 customers. Last year, Slide was approved to take over 250,000 policies from Citizens. The bad news, it's about 4.3 times what I was quoted for Citizens. The premium for the same level of coverage from Slide was $14,684. They've also swooped in to buy out policies from insurers that have gone bankrupt or left the state, like United Property and Casualty and Farmers Insurance. This year they provided a different option for me if I wanted to switch called Slide Insurance. That sounds shady. So just how risky is Slide Insurance? They aren't a publicly traded company, so it's hard to know all their finances. In interviews, Lucas touts the fact that Demotech gives them an A rating, but the more reliable Weiss Ratings gives them a D+, pointing out that Reporter Jason Garcia thinks Citizens should be expanded. A public non-profit insurer does not have to earn a profit. That allows it to charge insurance that is more affordable. And two Florida representatives agree. Republican Spencer Roach, who survived Hurricane Ian himself, and Democrat Hilary Cassell, a former litigator for insurers, both think Citizens should be available to all homeowners in the state. Think of this as the National Flood Insurance Program, but instead of the federal level, it's at the state level. Florida at some point in the future is going to embrace the idea of universal wind coverage. But they're up against a powerful political force that doesn't want to see Citizens expand. Since 2019, when DeSantis was sworn in, the insurance industry has donated nearly $10 million to DeSantis and the Republican Party. And the bills that DeSantis has passed since have almost all been handouts to the insurance industry. The entire overarching strategy that Governor Ron DeSantis and the current Florida legislature have is to help private insurance companies make money in the hopes that benefits will trickle down to consumers. Okay, so what does this all mean for the average homeowner or renter? Florida can prove as a model for what not to do. States should provide affordable, not-for-profit plans for residents that can't rely on private insurance. It's a risk, but I think it's one well worth taking. Paradise has a price. I'm hoping to live the rest of my golden years down here. I'm not going anywhere. And while these major insurance companies claim poverty, remember that in 2022, the CEOs of the top 10 insurance companies made a combined total of over $130 million. There's one more layer to this whole story. Climate change is increasing the likelihood of disasters that are driving up risks for insurance companies. But those same companies are literally adding fuel to the fire. Public Citizens Anne Perreault writes that insurance companies, including State Farm and Allstate, have major holdings in fossil fuel companies. State Farm is also part of ALEC, the group that has lobbied against emission restrictions. And for his part, DeSantis accepted almost $3 million from donors contributing to the climate crisis in 2022. And this year, he signed a bill that weakens environmental protections and bans construction of offshore wind turbines in state waters. What I've found is people, when they start talking about things like global warming, they typically use that as a pretext to do a bunch of left-wing things that they would want to do anyways. This year, the United States has already experienced 19 weather events that cost more than a billion dollars in recovery. We have to be honest about the impact of climate change, take efforts to fortify homes and cities, and start the work to transition to energy that doesn't use carbon. Thanks for watching The Classroom from More Perfect Union. We cover stories about economic equality and corporate greed. If there's a topic you want to see us cover, comment below. And as always, like and subscribe for more videos like this one.