How to Potentially Solve The Insurance Problem in Florida

Hurricane Wilma hits Miami Beach as a category 3 Hurricane on 10/24/2005. Two weeks later,11/5/05 the impact of Wilma is massive and damage is widespread.

On average at least one hurricane strikes Florida every two years and a strong hurricane hits Florida on average once every four years. There are roughly 7.5 million single family homes in Florida. According to The average cost of home insurance in Florida is $4,218 a year for a policy with a 2% hurricane deductible. That said I don’t know anyone who pays less than $7000 and the annual average price for Citizens Property Insurance is $5,295.

Let’s look at facts. The Citizens Property Insurance Corporation, the state-backed insurance company, estimates that the 2022 hurricane season will end up costing roughly $3.8 billion. That projection is up from its $2.3 billion estimate due to litigation costs, inflation, and the massive number of claims that were filed.
If every single family homeowner paid into a fund and that amount was $500 that would raise 3.75 billion dollars a year. If the amount was $3000 dollars still way less than the average cost of insurance the amount raised would equal $22.5 billion dollars.
Figuring out the exact amount that each homeowner would pay to make the system fair would take some work but I fully believe it would still be an amount that is likely less than half of what they pay now.
While it may seem like a good idea for every homeowner in Florida to pay into a fund for insurance, there are challenges but I think they could all be easily addressed.

There would need to be a formula for  the level of risk that each homeowner faces. Some homes may be more vulnerable to certain types of damage than others, such as those located in flood-prone areas.

There is the issue of moral hazard. If every homeowner is covered by the same fund, there may be little incentive for homeowners to take steps to mitigate risk or prevent damage. This could lead to higher overall costs for the fund and ultimately result in higher premiums for everyone. This would definitely need to be addressed.

Of course there would always be a risk of fraud and abuse but that is not any different than what we have today.

All in all I fully believe that with a little planning and level heads a system could be devised that would cover Floridians and lower costs for homeowners insurance.

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