There’s a price for every good and service. Always and everywhere. This is a notable point at the moment, and in light of the never-ending talk about whether home insurers will or will not continue to write policies in states like Florida.
At first glance, looming exits read as very simple: hurricanes of the Milton variety have scared home insurers away. What has brought on allegedly worse hurricanes? To pick up most any newspaper, it’s not infrequently suggested that hurricanes of a supposedly more lethal vintage are a consequence of what some deem man-made global warming.
About what newspapers suggest, no comment will be given here. About either the allegedly enhanced power of hurricanes or what some consider the cause of them. Debates about hurricanes and theories about global warming will be left to scientists.
At the same time, and without once again presuming to comment on what has (if at all) brought on challenging weather in Florida, there’s the problem of prices. There’s one for every scenario, including insurance for houses located in areas allegedly threatened by the presumed effects of global warming.
Figure that insurance is but a market signal. Nothing more, nothing less. And since it is, it can be said that insurance isn’t political, emotional, or both. It’s just a soberly arrived at price reflecting all known information.
Which is just a reminder that even if it were true about increasingly powerful hurricanes allegedly borne of soaring earth temperatures, that on its own wouldn’t cause insurers to leave the state of Florida. There’s a price for everything, including insurance of a house in a location perhaps viewed as progressively risky.
In which case it’s easy to deduce that the home insurance problem in states like Florida isn’t rooted in either more powerful hurricanes, global warming, or both. The real challenge in the Sunshine State is that insurance regulators within are unwilling to allow market prices to reflect the on-the-ground reality, a reality that oddly signals Florida’s rather bullish ascent.
To see the meaning of the above, it’s useful to contemplate Florida not in the present, but the one of fifty years ago. To say that Florida was less populated then is no reach, nor is it a reach to point out that one non-legislative factor that has loomed large in the state’s rapidly growing population has been the proliferation of air conditioning. With the latter increasingly the rule over the exception, Florida’s year-round livability has become exponentially greater.
Consider the above with locales like Naples top of mind. Then consider Naples in 1974 versus 2024. Not only is housing density much greater, but so are the prices of houses much greater.
It’s a sign that as Florida’s population has grown, so have opportunities grown for insurers to write all manner of policies. A winning scenario for all, but for the problem of price controls.
Insurers aren’t contemplating a Florida exit because of hurricanes like Ian, Helene and Milton. Why would they? Precisely because there are more houses, and more expensive ones at that, Florida would be an ideal place to expand market share.
The problem, of course, is that insurers aren’t presently being allowed to set prices that emerge free of political and emotional bias, rather they’re allowed to charge what regulators within the state will agree to. In other words, politics and emotion are presently trampling on market prices that, by virtue of them being set in markets, are free of politics and emotion.
The results are predictable. Home insurers aren’t in the business of charity. They have shareholders for whom they work. Right now they’re not allowed to charge the prices that best reflect all known information, and absent that ability, the cost of operating in Florida has become greater than it otherwise would be. Just don’t blame hurricanes or global warming. Blame those who allow their views on both to blunt the market signals that both may or may not be sending.
