AAA will not renew vehicle and home insurance coverage for some Florida clients, following a growing list of insurers reducing their presence in the Sunshine State due to the increased risk of natural disasters.
“Unfortunately, Florida’s insurance market has become challenging in recent years,” the company said in a statement emailed to CBS MoneyWatch. “Last year’s catastrophic hurricane season contributed to an unprecedented rise in reinsurance rates, making it more costly for insurance companies to operate.”
AAA declined to reveal how many customers’ policies would not be renewed, noting that the change would affect “a small percentage” of policy holders.
The company is the fourth in the last year to withdraw from insuring Floridians, indicating that extreme weather connected to climate change is disrupting the insurance market.Farmers Insurance has announced that it will no longer provide coverage in the state, affecting around 100,000 consumers.
Farmers claims that the change will only effect company-branded plans, which account for around 30% of all policies sold in the state.
Last year, Bankers Insurance and Lexington Insurance, an AIG subsidiary, left Florida, claiming that recent natural catastrophes had rendered it too expensive to insure residents. Hurricanes Ian and Nicole wreaked havoc on Florida in 2022, causing billions of dollars in damage and killing around 150 people.
Companies in Florida are required by law to give the Office of Insurance Regulation three months’ notice before informing clients that their policies will not be renewed.
Some Florida insurers have gone out of business in recent years, owing to hefty disaster claims. Drivers and homeowners who have been dropped by AAA have options for seeking a new insurer. According to Florida’s insurance company database, hundreds of businesses, including Allstate, Esurance, Geico, Hartford, and 21st Century, continue to provide policies in the state.
Soaring homeowner costs
Already, homeowners in the state pay around three times the national average for insurance coverage, and premiums are set to rise by 40% this year.
Insurance companies are fleeing Florida despite laws passed by lawmakers in December aimed at stabilizing the market. Last year, Gov. Ron DeSantis signed legislation that, among other things, establishes a $1 billion reinsurance fund and creates disincentives for frivolous lawsuits. The law goes into force in October.
The new measure has encouraged AAA, but “those improvements will take some time to fully materialize, and until they do, AAA, like all other providers in the state, are forced to make tough decisions to manage risk and catastrophe exposure.”
Insurers are staging a similar exodus in California, where AIG, Allstate, and State Farm have stopped accepting new customers, citing rising insurance prices caused by wildfires. Climate change has made the West warmer and drier during the last three decades, according to scientists, and it will continue to make weather more intense and wildfires more frequent and catastrophic.
California has more than 1.2 million residences at risk of extreme wildfire, far more than any other state, according to data published by the industry-supported Insurance Information Institute.
Insurance prices in Colorado are also rising due to wildfire hazards, while an Oregon effort to map wildfire risk was denied last year due to concerns that it would cause premiums to increase.