AAA will not renew the auto and home insurance policies for some customers in Florida, joining a growing list of insurers dialing back their presence in the Sunshine State amid a growing 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 say how many customers won’t have their policies renewed, saying only that the change will affect “a small percentage” of policy holders.
The company is the fourth insurer over the last year say it is backing away from insuring Floridians, a sign extreme weather linked to climate change is destabilizing the insurance market. On Tuesday,it will no longer offer coverage in the state, affecting roughly 100,000 customers.
Farmers said the move will affect only company-branded policies, which make up about 30% of its policies sold in the state.
Bankers Insurance and Lexington Insurance, a subsidiary of AIG, left Florida last year, saying recent natural disasters have made it too expensive to insure residents. Hurricanes Ian and Nicole devastated Florida in 2022, causing billions of dollars in damage and killing a total about about 150 people.
Under Florida law, companies are required to give three months’ notice to the Office of Insurance Regulation before they tell customers their policies won’t be renewed.
Soaring homeowner costs
Already, homeowners in the state pay about three times as much for insurance coverage as the national average, and rates this year are expected to soar about 40%.
Insurance companies are leaving Florida even as lawmakers in December passed legislation aimed at stabilizing the market. Last year,that, among other things, creates a $1 billion reinsurance fund and puts disincentives in place to prevent frivolous lawsuits. The law takes effect in October.
AAA said it’s encouraged by the new measure, but noted “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 taking on new customers, saying thatof underwriting policies.