Home insurance market in Florida is influenced by a numerous economic and social factors, weather conditions and even media bias. According to statistical results, “1.3 million Floridians are with property insurance”. The lines of insurance available depend on demand and, thus, largely on perceptions of risk and need. There is an opinion that because of natural disasters and hurricanes more and more people try to protect their property and take insurance. Speaking about an increase in home insurance, it is important to note that the general population of Florida is 1.8 million, and 1.3 million of them have home insurance. Thesis Recent years, home insurance increases greatly in Florida and leads to a home insurance crisis caused by unfair and fraudulent actions of private insurers.
Florida is one of the states affected by natural disasters (hurricanes). One of the ways in which people seek to regain control of their lives, to reduce stress, and to move towards some kind of peace of mind is by taking out insurance. Most Floridians prefer home insurance which gives them the clear prospect of indemnity without altercation with neighbors and without having to spend time and money going to court to get it. One of the main purposes of insurance is to achieve a rational and reasonable spread of risk, and to help people to do things which, otherwise, they would hesitate to do (Martinez, 2004).
As a general predictor of risk aversion, the personality of the insured is not helpful, because individuals who take high risks of certain kinds also avoid other risks at all costs. Cultural and social factors are thought to be more significant. People in Florida are willing to spend more than twice as much as people in other states to mitigate the risk of loss due to natural disasters. A particular anxiety for people in Florida, who have become more aware of their world, lies in the potential hazards over which they, as individuals, have no control. That kind of anxiety is not eased by the knowledge that they cannot live in society without trusting the skill, knowledge, and care of others (Martinez, 2004). All this fosters a general sense of insecurity, not least because sections of the public now feel that in times past trust in experts and in public institutions has been misplaced. Once again we see a sense of helplessness (lack of control) that feeds stress. In Florida, the home insurance rates have been always higher than in other states. One of the citizens comments: “we’ve recently received our homeowner insurance quote for the coming year, a rate increase of 40%” (Florida Homeowner Insurance, 2007). To the ordinary actual insured, who is not a model of behavior or rationality, something is risky if loss is relatively likely to happen or, although it is not likely to happen, if the effect will be disastrous if it does (Maddel, 2000).
Home insurance increases in Florida, and more and more people have to sell their homes because of high insurance rates and fraudulent actions of insurers. It is important to note that home insurance s separated into insurance on tangible property, including specific items of money, and insurance on intangible wealth, known as pecuniary-loss insurance. Insurance of tangible property is divided according to the kind of property (livestock, cargo, house, etc.) and also according to the peril (fire, theft, etc.). Whether or not fraud is really widespread, what is clear and what really counts is that insurers believe that fraud is widespread, and often approach claims in a spirit of suspicion. The legal framework for claims assumes good faith and trust -on both sides. Society is reluctant to believe that claimants are fraudulent, and the law makes it hard for the insurer to prove that they are, but it also assumes the good faith of the insurer, with the result that, if he wants to, it is easy for him to drag his feet over payment (Martinez, 2004). The duty of good faith between insurer and insured is sometimes specified as the foundation, although not the only foundation, of the rule that a fraudulent claim by the insured defeats the claim and terminates the contract o insurance surprise nobody; on the contrary, the point of claim is where one might expect the law to make the greatest demands of the honesty and good faith of the insured (Maddel, 2000).
It is possible to refute these arguments stating that home insurance does not increase in Florida, but shifts from privately owned companies to the states owned. “Abandoned by insurers with cold feet and empty pockets, homeowners are increasingly turning to the Citizens Property Insurance Corporation, the state-created insurer of last resort, which by law must charge more than private insurers to be noncompetitive” (Maddel, 2006). Thus, the statistical results prove that people have to sell their homes and move to other regions. Also, there is an increase demand for home insurance cased by natural disasters and floods. The insured is less concerned with the precise probability than with whether the risk seems probable or bad enough to justify paying (premium) to soften its effects; that depend on his view of things – his risk aversion.
In sum, home insurance market and home insurance increase greatly in Florida. More and more people prefer to use the state created insurer, and terminate contracts with private insurers. Floridians are aware of their ignorance and turn for advice. They are under pressure of competition from alternative outlets that purport to provide the public with cheaper insurance products. They are under pressure of time, not only to save money, but also to meet the expectations of the client; but they lack both the time to learn about new products and the time fully to explain them to the client.
References
- Florida Homeowner Insurance: Rapidly Rising Rates. (2007). Web.
- H.A.C. FLORIDA, INC. (2007).
- Maddel, L. (2000). Rising Insurance Rates Push Florida Homeowners to Brink. The New York Times, 2006. [Online].
- Martinez, R.A. (2004). Mold, Fire, Flood & Other Topics: Homeowners Insurance Explained.. R. A. Martinez.