Catastrophic disasters across the United States are contributing to the rising cost of homeowners insurance, and some experts believe it will not get better without significant changes in the industry. Gregg Barrett, CEO at WaterStreet Co., which sells property insurance software, said historical data is no longer as accurate to predict future events. Insurers that are unable to raise their rates due to regulatory constraints have resorted to exiting entire markets. California and Florida saw insurers leave or drop coverage over the last year, with one recent study suggesting up to 20% of Florida homeowners are without insurance. The state of California instituted a one-year moratorium on insurance companies canceling or not renewing policies for those affected by the wildfires. That damage is estimated to have surpassed $250 billion. Barrett said it is also more expensive to rebuild homes in high-risk areas, and bigger payouts by insurance companies make it less viable to provide affordable coverage. Mordechai L. Breier, managing partner at Insurance Litigation Group, said the problems facing the insurance industry cannot be attributed to climate change alone. According to Breier, insurance companies are avoiding high-risk areas, limiting coverage, increasing premiums, and imposing stricter claims restrictions to maintain or boost profit margins. Company profits are further boosted by legislation set to reform insurance that focuses on capping payouts and limiting consumer protections. Record profits are being posted by some of the largest publicly traded property insurers despite the home-insurance crisis sweeping the country. The Progressive Corp. posted net income of about $8 billion at the end of 2024 — more than double the $3.8 billion it reported in 2023 and up from a low of $694 million it recorded in 2022. Meanwhile, the insurance crisis means higher costs for homeowners. Digital-insurance marketplace Matic found homeowners saw an average increase of about 25% between 2023 and the first half of 2024, after a 17% increase the year before at policy renewal. About 65% of mortgage lenders reported at least one borrower they worked with recently had problems securing home insurance.
Source: Philadelphia Business Journal; 1/16/2025