Friday, September 22, 2023
Friday, September 22, 2023
Friday, September 22, 2023

AAA Ceases Insurance Offerings in Florida, Following Farmers




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AAA has made the decision to not renew auto and home insurance policies for certain customers in Florida, becoming the latest in a series of insurers scaling back their operations in the state due to the increasing threat of natural disasters, Your Content has learned.

In a statement provided to CBS MoneyWatch, the company acknowledged the challenging nature of Florida’s insurance market in recent years, citing the surge in reinsurance rates following the catastrophic hurricane season from the previous year as a significant factor.

Although AAA did not disclose the exact number of affected policyholders, they did mention that the change would impact only a small percentage of their customer base. This move marks the fourth instance within the past year of an insurer withdrawing coverage for Floridians, indicating the destabilization of the insurance market due to severe weather events linked to climate change.

Farmers Insurance, which recently announced its decision to cease coverage in the state, will affect approximately 100,000 policyholders; however, this change applies solely to company-branded policies, constituting about 30% of their policies sold in Florida.

Last year, Bankers Insurance and Lexington Insurance, a subsidiary of AIG, also exited the Florida market, citing the escalating expenses associated with insuring residents following the devastating hurricanes Ian and Nicole, which caused significant damage and claimed approximately 150 lives.

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Florida law mandates a three-month notice period to the Office of Insurance Regulation prior to informing customers about policy non-renewal.

Florida homeowners already face insurance premiums approximately three times higher than the national average, and it is projected that rates will rise by around 40% this year. Despite legislative efforts aimed at stabilizing the market, such as the $1 billion reinsurance fund and measures to discourage frivolous lawsuits signed into law by Governor Ron DeSantis last year, insurance companies continue to depart from the state.

AAA acknowledged the positive impact of these new measures but emphasized that it would take time for their effects to become fully evident. Consequently, AAA, like other providers in Florida, finds it necessary to make difficult decisions to manage risk and exposure to catastrophic events.

Similarly, insurance companies are also reducing their involvement in California due to the escalating costs associated with underwriting policies in the face of wildfires. AIG, Allstate, and State Farm have ceased accepting new customers in the state, attributing their decision to the warming and drying effects of climate change over the past few decades, which have increased the frequency and destructiveness of wildfires.

Data from the Insurance Information Institute, supported by the industry, reveals that California has over 1.2 million homes at extreme risk of wildfires, surpassing any other state.

Colorado is experiencing rising insurance premiums due to wildfire risks, while an Oregon initiative to map wildfire risk was rejected last year due to concerns about the subsequent surge in premiums it would cause.

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