The hidden impact of hurricanes: higher insurance premiums

Policyholders can expect to pay more for coverage in the years after hurricanes like Idalia.

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Myles Ma, CPFCSenior ReporterMyles Ma, CPFC, is a certified personal finance counselor and former senior reporter at Policygenius, where he covered insurance and personal finance. His expertise has been featured in The Washington Post, PBS, CNBC, CBS News, USA Today, HuffPost, Salon, Inc. Magazine, MarketWatch, and elsewhere.

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Hurricane Idalia struck Florida’s Gulf Coast with intense wind and rain, causing an estimated $9.4 billion in insured losses. [1] Big storms have an impact far beyond their initial landfall, and homeowners may have to face higher insurance premiums in the years to come, especially in areas where more hurricanes are more common.

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Expect higher premiums

“Policyholders whose homes are in these increasingly risky areas can reasonably expect their rates to rise over the coming years,” says W. Ben McCartney, an assistant professor at the University of Virginia’s McIntire School of Commerce.

When setting insurance premiums after a costly storm or wildfire, insurance companies not only have to account for their losses, but they also have to factor in how likely they are to face future losses. As climate change increases the odds of extreme weather, policyholders may have to brace for higher costs, McCartney says.

That’s not welcome news in Florida, which is already in the midst of a home insurance crisis, with many insurance companies opting to limit coverage or leave the state altogether. Premiums there are the highest in the country, and are rising faster than in any other state according to the Policygenius Home Insurance Pricing Report.


Latest on Florida's home insurance crisis

With insurance companies limiting their coverage or leaving Florida, it can be difficult to track which insurance options are (and aren't) available. To help Florida homeowners navigate this complex situation, we put together a roundup of the latest and most pressing insurance news from across the state.

  • A survey by Redfin and Zillow reports that 11.9% of homeowners in Florida plan to move in the next year due to climbing insurance rates — compared to just 6.2% of U.S. homeowners who plan to move on the national level. (April 2024)

  • A report slams Demotech — the rating firm that measures the financial strength and stability of insurance carriers in Florida — for inflating ratings of Florida home insurance carriers. "Nearly 20% of the companies doing business in Florida that Demotech rated as financially stable went insolvent during the period 2009 to 2022." This report hints that the home insurance market in Florida may be even more at risk than everyone originally thought. (April 2024)

  • Florida Governor Ron DeSantis warned homeowners that Citizens Insurance, the state-backed insurer of last resort, was insolvent. However, economists and insurance experts have ruled that this statement is mostly false. "Insolvency means a company cannot pay its bills today. That’s not so with Citizens, which has a $5 billion surplus and expects a surplus of more than $6 billion by the end of 2024." (March 2024)

Here's a look at some of the latest home insurance companies to pull back on coverage in Florida, along with those that are still writing policies in the Sunshine State.

  • Nationwide not renewing some policies in high-risk areas (December 2023)

  • Farmers Insurance no longer selling new policies (July 2023)

  • AAA not renewing some policies in high-risk areas (July 2023)

  • AIG no longer selling or renewing policies (March 2022)

  • Progressive no longer selling new policies (April 2022)

Florida homeowners can use Policygenius to compare home insurance quotes from several companies, including Citizens, Universal Property, and Slide Insurance.

Can the government help?

Florida lawmakers have increased financial assistance and passed new laws to protect insurance companies from frivolous lawsuits. [2] McCartney says policymakers can help homeowners directly by subsidizing their insurance, giving them relocation assistance, or helping them improve the structural integrity of their homes. 

The government can also find ways to reduce damage from future storms.

“Governments can do this by, for instance, correctly managing floodplains, having infrastructure to give residents advance notice of impending storms, and helping coordinate recovery efforts,” McCartney says.

How climate change will affect hurricane risk

Hurricane Idalia was likely strengthened by the warm waters surrounding the coast of Florida, says Venkataraman Lakshmi, professor of engineering at the University of Virginia. Water temperatures off the tip of Florida reached over 100 degrees during the summer.  [3]

“Very warm water increases the strength of a storm because evaporation from the ocean’s surface into the hurricane system increases the strength of the hurricane,” Lakshmi says. “Evaporating water is fuel for the hurricane.” 

As climate change causes ocean water temperatures to rise, there will be even more fuel on hand for powerful storms. Climate change will cause an increase in more extreme weather in general — not just hurricanes, but also droughts and wildfires.

“Climate change should be looked upon as something that increases the magnitude and frequency of these extreme events,” Lakshmi says.

But human behavior is also increasing the impact of extreme weather, as more people decide to live in risky areas like Florida. [4] Hurricane Idalia was powerful — reaching max wind speeds of 125 mph — but it made landfall in a less populated area, limiting the amount of damage it could have caused. While stronger than Idalia, 2022’s Hurricane Ian caused exponentially more death and destruction because it struck highly populated areas. [5] Florida is the country’s fastest-growing state. [6] The combination of more intense storms and the influx of people living in the most high-risk areas may have dangerous and costly consequences in the future.

Image: Warren Faidley / Getty