1. Of course the insurer's are going to try and cherry pick their customers...it's one of the parameters of their business, which is limiting their risk profile. Do you not try to limit your risk or consider the risk/benefit profile when making your investments?
2. If the premiums are so much above the risk involved, why would the insurer's be decreasing their coverage of the area? I do not know too many businesses that turn away 'easy money'. If the premiums they are charging are 'too much' for the risk they are assuming, then why would anyone buy the service at all?...Yes, that is a rhetorical question that we all already know the answer to, and brings me to point 3.
3. Anyone that cannot see that the government's decree that everyone have property insurance has a lot to do with the problem is blind....sure, everything was hunky dory in the many years of decreased weather activity...homeowners got what they assumed was reasonable insurance, banks/mortgage companies shelled out huge loans on pricey real estate, and the insurance companies made money. The price of the real estate rose dramatically...but all that did was increase the risk exposure of the insurance companies in the event of catasrophe. Even the state got involved in the insurance business, as some homes became commercially uninsurable.
Then 2004 and 2005 hit, and insurance companies wrote checks for tens of billions, exposing for them all too clearly the true 'risk' involved in their business. Some undercapitalized companies went out of business...the bigger ones realized that their true risk exposure COULD be realized...quickly. Now more insurers are considering getting out of the FL property casualty business.
If you want to read a most interesting report from the FL OIR, you can see it here:
http://www.floir.com/pdf/TheDifferenceADecadeMakes.pdf
The report estimates that the total value of FL commercial and residential real estate at $1.2 TR-illion, which is a lot of risk to be covered.
Why are you surprised that the 'average' guy/homeowner is subsidizing the 'poor risk' and wealthy homeowners? As I stated in an earlier post, we see that in medicine DAILY. The government caps the health care costs of two of the most likely groups to incur large health care costs...the poor and elderly...and then the medical community passes those costs on to those with insurance because SOMEONE has to pay the true cost of the total care delivered.
As you look at this situation, it should be clear that SOMEONE will take it in the shorts...someone will pay for the true cost involved. The only question is, who?
The government's answer is ALWAYS to spread the risk out amongst all constituents that have capital...because that's all they can do since they themselves do not produce anything of value to cover the cost.
Don't get me wrong, there are alternatives IMO...but every alternative starts with the government getting out of the insurance business and deregulating the industry. This will probably have profound economic impacts on the state, most likely a depreciation of real estate values across the board...some high-priced real estate on the ocean may in fact be 'un-insurable', but the people that take that hit will be the owners of the property and the banks and not the guy with the modest house well inland who's risk is much less.