A little-noticed line in the Florida Legislature’s latest attempt to fix the state’s fractured home insurance market promises to have big impacts on more than a million Floridians. It will force them to also buy flood insurance — even if their homes aren’t in designated flood zones.
The provision, included in a sweeping insurance bill passed late last year, will make flood insurance mandatory for any homeowners with hurricane wind policies from Citizens Insurance, the state-run insurer of last resort. At minimum, that’s likely to add hundreds of dollars a year to the insurance bill.
As the mandate is phased in over the next few years, it could affect 1.2 million current Citizens policy holders, who will be required to get flood insurance no matter where they live or see their coverage canceled.
It also will apply to any new Citizens customers, with some of them impacted as early as April 1. And there could be plenty of those as private wind insurance costs continue to skyrocket and more companies go belly up, leaving Citizens the best option.
“I haven’t seen a sweeping requirement like this anywhere else,” said Laura Lightbody, project director of the flood-prepared communities program at the Pew Charitable trust. “It’s a huge deal. There have been pie-in-the-sky calls for mandatory flood insurance for anyone who owns a home, so it’s a really big deal for a state that currently does represent a large amount of the policies under the flood insurance program, which is a big indicator of risk.”
The new policy could go a long way toward addressing Florida’s massive gap in flood insurance, but it will also drive up costs for many homeowners already facing spiraling insurance bills. Or, as some critics point out, the extra cost could be enough to push more homeowners out of the insurance market altogether, leaving them uncovered and unprepared for the stronger, wetter hurricanes scientists are predicting.
There is no doubt that many Floridians, even in coastal counties, are already vulnerable to catastrophic flooding losses. During Hurricane Ian, only 18% of homes in evacuation zones had flood insurance, and some estimates suggest that up to half the damage from the storm could be uninsured flood damage.
Even now, Florida leads the nation in flood insurance policies with 1.7 million in force, and if all 1.2 million affected Citizens policyholders sign up, it could nearly double the state’s flood insurance footprint.
When will you need flood insurance?
The policy doesn’t affect Citizens policyholders who aren’t insured for wind coverage, about 300,000 customers statewide. But for everyone else, the mandate will roll out over the next four years.
“It’s gonna kick in in a phased approach,” said Citizens spokesman Michael Peltier.
On April 1, it applies to all new policyholders with properties in a flood zone. On July 1, current policyholders who live in designated flood zones will be required to have flood insurance — a switch that will affect about 295,000 policies, according to Citizens.
Practically speaking, those first two moves may have only a small impact since flood insurance is already required for anyone with a mortgage on a property inside a flood zone. So most of those nearly 300,000 policyholders could already be required to have flood insurance.
But research shows that not all homeowners comply with the rules. A 2020 review of mortgages backed by the federal government in Florida showed that only about 65% of homeowners required to buy flood insurance had a policy.
“This will add a layer of enforcement to policyholders that are already required to have it and don’t,” Lightbody said.
But what will make the new Citizens policy so groundbreaking is when it starts to apply to folks outside flood zones.
Starting Jan. 1, 2024, anyone with home coverage over $600,000 is required to have flood insurance. That’s about 15,000 policies, according to Citizens. The next year, 2025, the policy applies to all homes with coverage over $500,000 — about 27,000 more policies.
By 2026, another 71,000 policies for homes $400,000 and up are included. On January 1, 2027, every single policy will be required to have flood insurance, another 720,000 policies — no matter where they live.
These numbers, estimates based on current totals, are also likely to rise. They don’t account for anyone else who signs up with Citizens in the coming months if their insurance companies drop them or hike their rates. It also doesn’t reflect new flood maps for places like Miami-Dade, which could increase the number of properties in mandatory flood insurance spots.
The county has yet to release its draft maps, but an early peek during a county presentation in 2021 revealed many homes in the Little River area are now included in new flood zones. The new maps could become effective later this year.
How much will it cost?
This mandate could represent a significant cost increase for Citizens policyholders. But exactly how significant is hard to pin down.
Like home and wind insurance, flood insurance rates aren’t standardized, so they vary by home and risk. Forbes pegs the average Florida premium at $699 a year, while the Insurance Information Institute estimates the average Florida premium is $1,150, compared to the national average of $985.
That number can get lower — or much, much higher — depending on how vulnerable a property is to flooding.
The vast majority of flood insurance in the U.S. is operated by the federal government’s National Flood Insurance Program and is largely based on FEMA flood maps that rate regions based on their flood risk. The riskiest zones are A and VE, which include all of Miami Beach and much of coastal Miami-Dade. Inside these “flood zones,” flood insurance is required for anyone with a mortgage.
The NFIP recently underwent a redesign to make flood insurance prices more fair called Risk Rating 2.0, part of the program’s goal to move away from the “in or out” of a flood zone to decide how much risk a property faces, and into a more nuanced look at individual lots.
Under this new pricing scheme, a million Floridians saw their annual rates rise and about 340,000 saw them fall, depending on how much flood risk they faced.
The NFIP has some guard rails for price increases, like capping the total cost for a single-family home at $12,000 a year, when before Risk Rating 2.0 some single-family homes paid as much as $45,000 a year. Annual premium increases are also capped at 18%, like Citizens rates are capped at 12% raises per year.
Concerns for consumers
Critics of the new Citizens policy, including FIRM, an advocacy group pushing for lower insurance rates in Monroe County, worry that the extra cost could push some Citizens policyholders to drop their coverage altogether if they don’t have a mortgage.
“Forcing property owners to carry insurance that they don’t need is unreasonable and burdensome,” FIRM wrote in a blog post. “There is no actuarial reason to make this mandatory. The only reason seems to be to further cull the ranks of Citizens policyholders.”
FIRM, like other critics, also says the Legislature’s latest efforts to right the insurance industry are aimed at helping insurers, not consumers. The most recent insurance bill limited consumers’ ability to sue their insurance companies, which insurance firms claim is the biggest issue driving up costs statewide. But reporting from the Tampa Bay Times found that excessive payouts to executives, not lawsuits, is what drove Florida insurance companies into insolvency from 2008 to 2018.
It’s unclear what impact Citizens’ new policy could have, but if it succeeds at adding more Floridians to the flood insurance rolls, some experts say that’s a good thing.
For one thing, having flood insurance unlocks a lot more help from the government after a flood event like a hurricane.
Roy Wright, the former head of the NFIP, told Congress that after a 2016 flood in Louisiana, people with flood insurance received an average of $86,500 in help from the government. Uninsured residents received an average of $9,150.
“I think there’s a misnomer out there that the government is going to make anyone whole after a flood event and that just isn’t true,” Pews’ Lightbody said. “In a state that has increased sea level rise, high precipitation events, a lot of risk from hurricanes, it’s really important that Floridians have flood insurance.”
