Home insurance premiums are soaring across America due to the increased severity and frequency of natural disasters, and some insurance providers are abandoning high-risk states entirely.
Surging Insurance Rates
Industry experts predict that there will be a massive surge in the average US home insurance premium, with a 6% increase this year, which will culminate in a 20% increase over the past two years. The main contributors to this massive increase in home insurance premiums are natural disasters, rising reinsurance costs, and higher fees for home repairs.
In a new report from Insurify, a Massachusetts-based insurance comparison platform, they highlighted the increasing unpredictability of housing costs due to these significant insurance rate hikes.
A co-author of the Insurify analyses, Cassie Sheets, stated, “Many Americans are motivated to buy a home because they think their housing costs will remain fixed or stable when compared to renting.”
Unpredictable Housing Costs
Despite this motivation from eager Americans, Sheets went on to say, “This trend of significant insurance rate hikes makes housing costs more unpredictable.” Based on historical climate data in the United States, the increasing frequency and severity of natural disasters due to climate change is the hidden issue driving up these prices.
Thanks to the changing climate, the U.S. has seen an unprecedented increase in billion-dollar disasters that have hit the country and drastically changed the lives of people all across it.
In the 1980s, the United States experienced an average of three billion-dollar disasters per year, but in 2023, that number jumped to twenty-eight, resulting in massive insurance price hikes.
Abandoning Markets
In response to the increasing risks and repair prices, many insurance companies are simply abandoning high-risk markets. This leaves homeowners with few options to insure their property, and sometimes, they are left with none at all.
In states like California and Florida, where homeowners are constantly under the threat of increasing natural disasters, they have already seen major insurers abandoning massive markets of homeowners entirely.
Florida and Louisiana are two of the states facing the steepest increases in home insurance premiums due to their frequency and vulnerability to natural disasters. Florida’s premiums are expected to rise by 7% this year, averaging $11,759 per home, and Louisiana’s is the highest, with a 23% expected increase to $7,809.
Forgoing Insurance
Due to these record-high premium prices, many homeowners are giving up their property insurance plans entirely, which is more than alarming given the increasing frequency of natural disasters.
In California, the state’s largest insurer, State Farm General, announced that it would stop offering insurance to 72,000 properties throughout the state. Months after State Farm General made the announcement to stop insuring these 72,000 properties, they finally released a statement explaining the reasoning behind this difficult decision.
The State Farm statement said, “This decision was not made lightly and only after careful analysis of State Farm General´s financial health, which continues to be impacted by inflation, catastrophe exposure, reinsurance costs, and the limitations of working within decades-old insurance regulations.”
The statement continued, “State Farm General takes seriously our responsibility to maintain adequate claims-paying capacity for our customers and to comply with applicable financial solvency laws,” and, “It is necessary to take these actions now.”
Holding Insurers Accountable
In response to State Farm General’s Decision to leave California, Deputy Insurance Commissioner Michael Soller said, “One of our roles as the insurance regulator is to hold insurance companies accountable for their words and deeds.”
Soller then concluded his statement by saying, “We need to be confident in State Farm’s strategy moving forward to live up to its obligations to its California customers.” However, it has yet to be seen if the Deputy Insurance Commissioner can live up to her promise and ensure that State Farm General meets California homeowners’ expectations.
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