Are you feeling the impact of increasing homeowners insurance costs? You’re not alone. Americans all across the country are experiencing the burden of higher bills. According to a recent analysis by S&P Global Market Intelligence, the national average rise in homeowners’ premiums is 8.8% so far this year. However, residents in some states are facing even larger increases.
More than a dozen states have seen double-digit rate hikes. Arizona is currently the hardest hit, with the largest insurers in the state collectively raising their rates by a weighted average of 18.4% through Sept. 1. Texas and Illinois follow closely behind with increases of 16.4% and 16.3% respectively. Other states experiencing significant increases include Arkansas, Louisiana, Tennessee, and Utah.
On the flip side, Hawaii, Vermont, and New Jersey have witnessed the lowest average increases this year at 1.8%, 2.5%, and 2.8% respectively, as reported by S&P Global.
There are several factors contributing to these rising costs. Insurance companies are grappling with inflation, climate change, an influx of people moving to high-risk areas, and expensive reinsurance (insurance for insurers). As the costs for insurers continue to rise, they pass on the burden to homeowners.
According to S&P Global, homeowners insurance costs in the United States have surged by a cumulative 30.7% from 2018 to 2023 year-to-date. Some insurance companies have even decided to reduce their exposure to states prone to extreme weather or have completely withdrawn from those areas.
It’s undeniable that homeowners insurance is becoming increasingly expensive. If you’re feeling the pinch, rest assured that you are not alone in this situation.
Florida: A Changing Landscape for Insurance Companies
Florida is facing a significant challenge in the insurance industry. National insurance companies have deserted the state, leaving homeowners to grapple with the consequences. Even small insurers have been forced out of business. As a result, Florida’s publicly-backed insurer of last resort has emerged as the largest insurance provider in the state.
While excessive litigation is undoubtedly a headache for insurers, other factors contribute to their struggles. Hurricanes, climate change, and rapid development pose insurmountable obstacles. Florida’s population has more than doubled since 1980, reaching a staggering 22 million people. Most of them reside in coastal counties, exposing a greater number of individuals and structures to potential storms. Additionally, climate change has led to warmer temperatures and the possibility of more powerful storms.
A recent analysis conducted by insurer Swiss Re sheds light on the severity of the issue. According to their findings, Hurricane Ian, the costliest storm to hit Florida in 2022, would have caused significantly lower insured losses if it had occurred in the 1970s. This assessment even considers the implementation of stricter building codes intended to fortify homes and other structures. The primary contributing factor to these increased losses is the exponential growth in population.
The study conducted by Swiss Re specifically highlights the influx of people in coastal metropolitan areas in the South, such as Houston and Florida. This influx has resulted in highly concentrated property values. Consequently, when a hurricane strikes these areas, losses are disproportionately higher.
Florida’s insurance landscape is being reshaped by these challenges. Homeowners are grappling with soaring insurance premiums, while major insurance companies opt to leave the state. The surge in population, combined with the looming threats of climate change and hurricanes, presents an enduring predicament that demands immediate attention.