Homeowners Insurance Market Causing Headaches Across the Country


A new report, “Homeowners Insurance Affordability” by the Insurance Research Council (IRC), outlines how the high cost of coverage is impacting households across the country. According to the IRC report, the average expenditure on Homeowners insurance increased from $508 in 2001 to $1,411 in 2021, a 5% annualized rise. In comparison, U.S. average household income increased more moderately, with an annualized growth rate of 2.5% from 2001 to 2021.

These average increases represent the latest figures available on expenditure data. Some areas in the country have seen much higher premium increases. For example, in Florida, the statewide average premium to insure a single-family house increased by 23.9% – from $2,798 at the end of June 2022 to $3,466 at the end of December 2023, according to data from the Florida Office of Insurance Regulation.

Then there are individual stories, with homeowners experiencing skyrocketing price hikes. An article in The New York Times featured one homeowner from Iowa whose house was damaged during the 2020 derecho. His insurance coverage jumped to $9,189 this year from $6,453, a 42% increase. Brokers are saying this is common, with some insureds seeing 50% hikes.

Insurance Carriers Exiting Markets

Homeowners are not only experiencing rate hikes but are also scrambling to find coverage as several carriers withdraw from specific areas. California, for example, has seen numerous carriers exit the market. Just recently, Tokio Marine America Insurance Company and Trans Pacific Insurance Company said they are withdrawing from the homeowners and personal umbrella insurance markets in the state effective July 1, 2024.

In March, State Farm also announced that it’s dropping about 72,000 property policies, of which 30,000 are homeowners policies, across California, including some of the tonier areas in Los Angeles. According to The New York Times, most of State Farm’s clients in West Los Angeles and areas near the Santa Monica Mountains, including Bel-Air, Pacific Palisades, Brentwood, and Woodland Hills, would lose their coverage when the nonrenewals begin to take effect in July. Insurers have cited high inflation, catastrophe exposure, reinsurance costs, and the constraints imposed by decades-old insurance rules as reasons for reducing coverage in the state.

Hartford Insurance is no longer writing new policies in California effective February 1, 2024. Allstate, Farmers Insurance, AIG, Nationwide, and USAA have also decided to stop writing new policies for homeowners or have left the state entirely.

About a dozen insurance companies have left the Louisiana homeowners market since hurricanes Laura, Delta, and Zeta in 2020 and Ida in 2021.

Progressive Insurance began nonrenewing policies in Florida this year, following at least a dozen insurers that have stopped issuing policies in the Sunshine State since January 2022. However, a bright spot exists: Florida’s Office of Insurance Regulation has approved eight new insurance companies to enter the state’s insurance market and says insurance rate increases are moderating in certain areas.

Iowa saw several insurers no longer writing homeowners insurance since the start of 2023, dropping tens of thousands of customers. Insurance agents say it’s getting more difficult to find carriers that will write new business.

Lots of Losses, Inflation

The driving force behind higher homeowners pricing is the frequency and severity of natural disasters, leading to a spike in claims in many parts of the country. In the western U.S., drought and heatwaves resulted in “extraordinary wildfire seasons,” according to the National Oceanic and Atmospheric Administration (NOAA).

According to the Office of Coastal Management, in 2023, there were 28 weather and climate disasters with losses exceeding $1 billion in the U.S. The combined total cost of these 2023 disasters is $93.1 billion. In addition, previously smaller-scale threats like hail and windstorms have become more intense and frequent, impacting insurers’ profitability.

According to AM Best data, homeowners insurance was unprofitable in 18 states in 2023, up from eight in 2013. Most of those states are in the interior of the country, where severe storms and hail hit in the Midwest and Southeast, and across much of the West, where wildfires have had devastating effects. The S&P recently released a report saying that homeowners insurers’ net combined ratio surpassed 110% in 2023.

Inflation has also impacted insurance premiums as material and labor costs have spiked. Higher construction costs have made repairs more costly. Since 2020, residential building costs have risen almost 28%.

Upcoming Hurricane Season

Forecasters are predicting an explosive hurricane season, with the Atlantic basin becoming the “ideal environment for hurricanes as El Niño, a time of warming ocean temperatures, transitions into La Niña, which will cause cooling,” according to NOAA. The likelihood of La Niña developing by June to August are at 60%, says NOAA. Depending on the outcome of the season, this could see Property rates increase even more.

What Are Homeowners Doing to Get Coverage?

Some states, including California, Minnesota, and Georgia are encouraging homeowners to make their properties more resilient (like investing in stronger roofs) in order to reduce insurer losses and get people covered.

Homeowners are increasing their deductibles, including taking higher wind and hail deductible levels. In several states, such as California, Florida, and Louisiana, people have turned to their state’s insurer of last resort to fill the gap left by the departures of private insurers. Others are looking to the E&S market, which provides coverage to higher-risk areas.

Sources: IRC, WSJ, New York Times, AM Best