Florida Homeowners Face High Insurance Claim Denials, Report Finds

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A new report reveals that Florida's top property insurers are denying homeowners’ insurance claims at unusually high rates, coinciding with a surge in losses from severe weather events.

According to Weiss Ratings, three of Florida’s largest insurance carriers—Universal Property & Casualty Insurance Co., State Farm Florida Insurance Co., and American Bankers Insurance Co. of Florida—denied payments on a significant portion of claims in 2023. Between 37% and 51% of the homeowners' claims submitted to these insurers were closed without payment, far exceeding the national average denial rate of 37.4%.

These insurers, ranked second, third, and fifth in the state by market share, handled a total of 153,074 claims last year. However, 71,448 claims went unpaid, a rate that is raising concerns among homeowners and consumer advocates alike.

Denials Linked to Growing Climate-Related Losses

The rise in claim denials is tied to the increasing number of severe weather events, such as hurricanes, that have left Florida homeowners dealing with significant property damage. Martin Weiss, the founder of Weiss Ratings, pointed out that these high denial rates have been climbing for nearly two decades and are particularly problematic in states prone to natural disasters, like Florida.

“There’s nothing normal about these high denial rates,” Weiss stated, emphasizing that they have now reached "alarming levels."

American Bankers Insurance Co. of Florida, the state’s fifth-largest insurer, stood out with a denial rate of 51.2%, rejecting over half of the 93,814 claims it processed in 2023. With 316,500 active policies, many of which are concentrated along Florida’s vulnerable Gulf Coast, the company is expected to face a new wave of claims in 2024, especially after Hurricane Helene caused widespread damage.

Despite the significant number of claims denied, American Bankers did not respond to requests for comment on the issue.

Reasons for High Denial Rates

Insurers often cite fraudulent claims or policyholder confusion over what damages are covered as the primary reasons for such high denial rates. However, Weiss contends that many insurance companies deny claims out of financial necessity, suggesting that insurers may prioritize shareholder profits over maintaining adequate reserves to cover catastrophic losses.

“Instead of maintaining adequate reserves to cover the likely potential damage from storms, floods, and forest fires, many insurers distribute the funds to shareholders or move them to other subsidiaries,” Weiss explained.

Allegations of Fraud and Misconduct

Adding to the controversy, a Tampa-based insurer, Heritage Insurance, is facing allegations of fraud following claims that it deliberately avoided paying homeowners after Hurricane Ian. Whistleblowers have accused Heritage and at least five other Florida insurers of manipulating damage assessment reports to reduce the repair estimates, thereby lowering payouts to policyholders.

The growing number of denied claims is fueling concern among Florida homeowners, especially as climate-related disasters become more frequent and severe. The insurance industry, already facing historic challenges in the state, is likely to come under increasing scrutiny as policyholders seek to recover from the damage left in the wake of these powerful storms.

As the insurance crisis in Florida deepens, consumers and regulators alike are calling for more oversight to ensure that homeowners are fairly compensated when disaster strikes.