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'I'm flabbergasted:' Homeowner's insurance canceled two months after buying Lehigh Acres home

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Posted at 5:08 PM, Aug 11, 2022
and last updated 2022-08-12 04:15:16-04

LEHIGH ACRES, Fla.  — A national homeowner's insurance ratings firm has downgraded several companies, impacting homeowners and their policies.

Demotech has downgraded three companies and 14 potential downgrades are delayed. It may not seem like a big deal, but in a homeowners insurance market that's already tough — it makes a bad situation worse.

Florida Gulf Coast University economics professor Victor Claar explains how a ratings downgrade works. He says companies, like Demotech, look at how much risk a company has.

If it's too much, the firm can lower the company's ratings. For homeowners, this means your insurance company is struggling - likely financially. You could see policy cancellations, high premiums or a lack of policies because of the rating.

A Lehigh Acres woman is going through this situation, except her insurance company didn't get downgraded — they're just canceling her policy all together.

"I'm just flabbergasted at what happened," said Tammy Pankau, who got a cancellation letter from her insurance company.

Pankau closed on her Lehigh Acres home in July. Tower Hill Insurance said it's canceling her policy on August 26, less than two months after Pankau moved in.

"There's a few things — lifting shingles, granular loss and roof patches on the shingles," the reasoning in the letter sent to Pankau said.

She said the roof inspector, prior to closing on the home, said it was in good condition for a roof close to 16 years old. There were a few things that could be fixed, but not needed for a policy.

Pankau said the previous homeowners went ahead and made the fixes. That was right before she said Tower Hill Insurance approved her policy. Now, Pankau is forced to find a new policy.

"The number of cancellations of policies over the last year is really concerning," Claar said.

Claar believes the number of cancellations comes down to money.

"If they run out of money because there have been too many payouts in a particular region, then the bucket of money’s empty and the insurance company has to cancel policies," he explained. "When any insurance rating agency downgrades an insurance company, it means that it looks riskier than it used to look. You can put insurance from them, but the likelihood that they’ll make good on your policy is not as good as if that company had a higher rating."

We looked into Tower Hill Insurance and it was not downgraded, so it's not clear why they're dropping policies.

Claar believes to stop companies from dropping policies, Florida needs more competition. He means more insurance companies need to come to Florida.

With downgrades, this is less likely because they may not be able to insure in Florida anymore if they receive a low rating.

"It breaks my heart that this is happening to so many people," Pankau said.

We reached out to Tower Hill Insurance about the cancellation and have not heard back as of Thursday afternoon. Fox 4 also contacted the governor's office, asking how the property insurance law passed on May 26 could help people like Pankau in this situation. They have also not returned our request.

Claar says there are ways to navigate this crisis. He says to shop around and take advantage of every agency you can find.

You can also go through an independent agency, rather than a large company because they can shop around more.

Also, if you have the option, he said to move inland or north because getting out of a flood zone could lower your insurance rate.