You’ve probably seen the headlines about home insurance companies leaving Orlando over the last few years. Understanding how this issue affects home sales is critical for real estate agents. Let’s examine how home insurance companies leaving Florida affects the Orlando real estate market and whether there’s good news on the horizon.
The Insurance Crisis in Florida: An Overview
Florida experienced an exodus of insurance companies in 2022, with major providers either leaving the state or significantly increasing premiums. Companies left for multiple reasons, including hurricanes and excessive litigation.
Orlando, a hub for families and investors, still feels the effects of this state-wide issue. Homebuyers struggle with increased homeowner insurance premium costs, which can raise their monthly housing expenses by hundreds of dollars.
Regardless of the reasons why insurance companies left the state, real estate agents must pay attention to how this news affects their clients. The insurance market directly affects real estate transactions. Rising premiums and fewer coverage options can deter first-time homebuyers and complicate closings. Understanding these dynamics is crucial for agents to counsel clients and maintain confidence in the real estate market.
Key Takeaways
- The departure of home insurance companies in 2022 significantly impacted Orlando’s real estate market, with increased premiums raising housing costs and discouraging buyers.
- While Orlando benefits from a reduced risk of storm surges compared to coastal cities, its inland location still faces hurricane-related wind damage. Short-term rental properties and older homes also encounter higher premiums, complicating sales for investors and homeowners alike.
- Government reforms, stabilizing inflation, and higher premiums have helped stabilize the insurance market, with nine new insurers entering Florida. However, large insurers remain scarce, and claim denials are increasing, leaving homeowners reliant on smaller or state-backed providers.
- Agents can stand out by educating clients about insurance costs, partnering with local experts, and emphasizing Orlando’s relative resilience to attract buyers despite the challenges posed by rising insurance premiums.
Why Did Insurance Companies Leave Florida?
Several factors contributed to insurers withdrawing from Florida.
1. Hurricanes
Repeated hurricane damage led to billions in claims, making Florida one of the riskiest states for insurers.
2. Fraudulent claims
Rampant litigation and fraudulent roofing claims inflated payouts, driving insurers away.
3. Regulatory hurdles
Florida’s regulatory environment limits insurers’ ability to adjust rates quickly, creating financial losses.
4. Reinsurance costs
Higher costs for reinsurers (the companies that back insurance providers) compounded the problem.
How the Orlando Real Estate Market Differs From Other Florida Cities
Orlando’s housing market presents a unique profile within Florida. However, Orlando residents are still negatively affected by Florida’s insurance problems.
While the metro area’s inland location reduces the risk of storm surges, the area is still susceptible to hurricane-related wind damage. Consequently, homeowners in Orlando may face substantial insurance premiums, though generally lower than those in coastal cities like Miami and Tampa.
In addition to Orlando’s geography, the city caters to tourists, and short-term rental properties are prevalent. However, these rental properties often face higher insurance premiums, posing challenges for investors.
Regardless, Orlando’s housing market remains competitive. The average home value is $379,454, a 2.2% increase year over year (Zillow November 2024). Buyers and sellers must navigate the added complexity of insurance costs when purchasing a property.
Prospective homeowners and investors in Orlando should carefully consider these factors, balancing the benefits of the city’s dynamic housing market against the challenges posed by insurance costs.
Effects of Higher Insurance Premiums on Orlando Housing Prices
The insurance crisis has led to tangible shifts in Orlando’s housing market.
- Higher closing costs: Elevated insurance premiums increase the overall cost of purchasing a home, as buyers must pay upfront for insurance coverage to ensure coverage when they take ownership of the property.
- Limited buyer pool: Rising premiums discourage some prospective buyers, especially first-time homeowners and budget-conscious buyers, reducing the number of qualified purchasers in the market.
- Older homes may be more difficult to sell: Homes with older roofs or outdated construction may become more challenging to sell, as insurers are more likely to impose higher premiums or deny coverage altogether, prompting buyers to favor newer properties in top Orlando neighborhoods with hurricane-resistant homes.
Future Outlook: What’s Next for Orlando’s Insurance Market?
There’s good news on the horizon for Florida buyers. The Florida property insurance market, once described as “hanging on a shoestring” in 2022, has seen notable improvements, thanks to government reform, stabilizing inflation, and years of rising premiums. These changes have bolstered insurers’ financial positions, with rate increases averaging less than 1% this year and nine new companies entering the market.
However, challenges persist. Large insurers have reduced their presence, leaving smaller companies with limited capital to dominate. Additionally, policyholders face increasing claim denials, particularly for uncovered flood damages, while state-backed insurance companies carry more risk as insurers of last resort. Despite progress, experts caution that Florida’s market remains fragile, with significant hurdles for both insurers and homeowners.
Strategies for Real Estate Agents Navigating These Challenges
You can do nothing about insurance premiums as a real estate agent. However, here are some actionable strategies you can take to better serve your clients.
- Educate your clients. Keep buyers and sellers informed about insurance requirements, costs, and potential reforms.
- Build local expertise. Partner with insurance professionals to offer clients tailored advice.
- Highlight Orlando’s resilience. Emphasize Orlando’s lower risk compared to coastal cities when marketing properties.
- Adapt pricing strategies. Help sellers adjust prices to account for higher insurance premiums.
- Stay updated. Monitor legislative changes and industry developments to remain a trusted resource for clients.
Orlando’s insurance crisis presents challenges, but it also creates opportunities for those starting as a real estate agent in Orlando to stand out as knowledgeable advisors. By staying informed and proactive, agents can help clients navigate these hurdles and continue driving success in one of Florida’s most dynamic markets.
Source:
Scott, Amy. “Is the Florida Insurance Market Really ‘Stabilizing’?” Marketplace, November 22, 2024. https://www.marketplace.org/2024/11/21/florida-insurance-market-stabilizing-homeowners-hurricane-natural-disaster/.