AAA says it will not be renewing some insurance policies in Florida due to an "unprecedented" rise in reinsurance rates in the state following last year's hurricane season, making the company the latest insurer to reduce its risk exposure in the Sunshine State.
In a statement released to FOX Business on Wednesday, AAA emphasized that it is not leaving the state of Florida and actually intends to increase new auto and homeowners business there, but has stopped renewing "a small percentage of higher exposure package policies" underwritten by Auto Club Insurance of Company of Florida that bundle both types of coverage.
"Unfortunately, Florida’s insurance market has become challenging in recent years," the statement reads. "Last year’s catastrophic hurricane season contributed to an unprecedented rise in reinsurance rates, making it more costly for insurance companies to operate. Prior to that, the market was already strained by an increase in claims costs due to inflation and excessive litigation."
AAA did not reveal how many policyholders were affected, but said those customers have already been notified and would be able to reapply for coverage through its sister carrier, Auto Club South Insurance Company.
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AAA's announcement comes a week after Farmers Insurance made a similar move in reducing coverage in Florida, saying it would no longer offer Farmers-branded auto, home and umbrella policies in the state.
Florida's insurance market has experienced difficulties in recent years, with some private insurers becoming insolvent, and others choosing to halt coverage there altogether.
Seven insurers have been declared insolvent in Florida since early 2022. Average annual property insurance premiums jumped 42% this year to $6,000 in Florida, compared to a national average of $1,700. About 15% of homeowners in the state didn’t have property insurance, compared to the national average of 7%, according to the Insurance Information Institute, a research organization funded by the insurance industry.
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The GOP-led legislature and Republican Florida Gov. Ron DeSantis have grappled with the issue each of the last two years, including a special session in December. Most of the focus has been on shielding insurance companies from lawsuits and setting aside money for reinsurance to help protect insurers.
The governor's office has said the reforms will take time to go into effect, and AAA echoed State Farm Insurance in expressing optimism that reforms will help.
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"We are encouraged by the statutory changes that have recently taken effect and believe they will provide positive results," AAA said. "Those improvements will take some time to fully materialize and until they do, AAA, like all other providers in the state, is forced to make tough decisions to manage risk and catastrophe exposure."
The Associated Press contributed to this report.
