Category Archives: Insurers and the Economy

Affordability, Homeowners Insurance, Insurers and the Economy, Market Conditions

Triple-I Chief Economist Testifies on NYC Measure On Short-Term Rentals

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By Loretta Worters, Vice President – Media Relations, Triple-I

Triple-I Chief Economist and Data Scientist Dr. Michel Léonard provided insurance insight to the New York City Council’s Committee on Housing and Buildings as they consider Local Bills 948-A and 1107-A. The measures aim to address New York City’s housing-affordability challenges by expanding homeowners’ ability to earn income through short-term rentals.

Léonard’s testimony focused on helping policymakers understand the protection gaps that can arise when residential dwellings are used for commercial purposes. He began by emphasizing Triple-I’s role as a nonprofit research and education organization, not a lobbying entity.

Many homeowners, Léonard noted, are unaware that standard homeowners’ policies generally exclude commercial activity, meaning hosts who fail to update their coverage may face denied claims, inadequate liability protection, or higher out-of-pocket costs if a loss occurs. Because short-term rentals fall under commercial use, homeowners who rent out their homes — whether occasionally or regularly — may inadvertently operate without appropriate coverage.

Operating a short-term rental typically requires:

  • Notifying their insurer,
  • Adhering to policy terms, and
  • Obtaining short-term rental-specific or commercial coverage.

Committee Chair Pierina Ana Sanchez asked what the cost impact might be for homeowners who must shift to a commercial policy. Léonard explained that, while costs vary, the more pressing issue is that many homeowners are unaware they have gaps in coverage.

This means homeowners, renters, and residents could all face significant financial or liability risks if an incident occurs. These risks are especially complex in multi-unit buildings, where short-term rental activity can affect both an individual unit’s policy and the building’s master policy—potentially increasing premiums and liability exposure for all residents. The result can be large uncovered losses, disputes, or claims that ripple throughout buildings and neighborhoods.

Homeowners insurance in New York City is significantly different from New York State. In written testimony to the New York Senate Committees on Investigations and Government Operations, Insurance, and Housing, Construction, and Community Development on Tuesday, November 18, Triple-I Chief Insurance Officer Patrick Schmid cited data from the Insurance Research Council (IRC), saying New York ranks 29th in its homeowners’ affordability study, with a 2.11 percent ratio of homeowners’ insurance expenditure to median household income. This is a lower percentage than a decade earlier for the state. According to IRC, New York’s homeowners’ insurance expenditures equal 0.39 percent of median.

Insurance in New York City is complicated, influenced by high property values, dense construction, and a challenging legal and claims environment. Rising labor and construction costs also contribute to higher premiums and more severe claims.

Coverage gaps and denied claims, even when policies are applied correctly, can lead to public misunderstandings about insurance. As Allstate CEO Tom Wilson recently noted, trust between consumers and companies is at a “tipping point” and must be reinforced through reliability and clear communication.

With its independent insight, Triple-I gave policymakers a clear understanding of the potential insurance consequences of expanding short-term rentals in residential buildings, helping them make informed decisions that balance affordability, consumer protection, and risk management.

Learn More:

Triple-I Testifies on New York Insurance Affordability

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Affordability, Insurers and the Economy, Market Conditions

Triple-I Testifies on
New York Insurance Affordability

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By Jeff Dunsavage, Senior Research Analyst, Triple-I

New Yorkers – like residents of all U.S. states – have been struggling with rising costs in recent years, including the cost of home and auto insurance coverage. This week, Patrick Schmid, Triple-I’s chief insurance officer, testified to New York lawmakers about why homeowners’ insurance premiums are rising and where New York policyholders stand relative to other states.

“New York’s homeowners’ insurance market is, in fact, functioning well and remains affordable when properly contextualized,” Schmid said in written testimony to the New York Senate Committees on Investigations and Government Operations, Insurance, and Housing, Construction, and Community Development. “While premiums may appear high in absolute dollars, they are relatively average and reasonable as a percentage of household income.”

Citing data from the Insurance Research Council (IRC), Schmid said New York ranks 29th in its homeowners’ affordability study, with a 2.11 percent ratio of homeowners’ insurance expenditure to median household income ratio. This is a lower percentage than a decade earlier for the state. According to IRC – like Triple-I, an affiliate of The Institutes – New York’s homeowners’ insurance expenditures equal 0.39 percent of median home value.

“When a home costs $413,588 and insurance costs $1,602 annually (0.39% of the home’s value), the insurance premium is not necessarily the driver of unaffordability within the region,” Schmid said. “The underlying property cost, and associated replacement costs, are likely a key challenge.”

He compared New York with:

  • Louisiana, with a ratio of 1.18 percent (more than three times New York’s)
  • Mississippi, at 1.04 percent (nearly three times New York)
  • Alabama, at 0.78 percent (twice New York)
  • Florida, at 0.4 percent (1.7 times New York)

“Only 20 states have more efficient insurance costs relative to home values,” Schmid said. “This contradicts the narrative of an affordability crisis in New York’s homeowners insurance market. Our market is delivering coverage at rates that are among the most competitive in the nation when measured against the value of assets being protected.”

New Yorkers face significant cost burdens that are structural and related to a variety of factors outside of insurance, Schmid said.

The fundamental driver of insurance costs is the cost to rebuild homes, most notably:

  • Labor costs: Skilled trades in NY metro areas command premium wages;
  • Material costs: Transportation, storage, and compliance add to expenses;
  • Building codes: Stricter standards increase rebuilding costs but improve long-term resilience and reduce future losses; and
  • Land values: Property values include expensive land that doesn’t require insurance, making the actual structure component even more valuable proportionally.

Schmid cautioned against lawmakers following the temptation to intervene in insurance markets – as some states have attempted to do in recent years — emphasizing that “targeting insurance premiums would address a symptom rather than the cause, potentially destabilizing a well-functioning, competitive market without improving overall housing affordability for New York residents.”

Learn More:

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Catastrophes, Disaster Preparedness, Disaster Resilience, Insurers and the Economy

End of Federal Shutdown Revives NFIP — For Now

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By Lewis Nibbelin, Research Writer, Triple-I 

With last week’s end of the longest U.S. government shutdown in history, Congress reauthorized FEMA’s National Flood Insurance Program (NFIP).  

During the shutdown, the NFIP continued to pay claims using available funds, but it could not sell or renew policies until reauthorized. These restrictions affected an estimated 1,300 property sales each day, as prospective property owners must purchase flood coverage in Special Flood Hazard Areas (SFHA), where private flood options – despite gaining traction – are still limited. 

With millions of homeowners and countless communities relying on the NFIP, many organizations across the risk and insurance industry sent a letter urging congressional leaders to reauthorize NFIP ahead of its expiration, writing that a lapse “could further impact affordable housing, create additional challenges for small businesses, unnecessarily further increase the cost of homeownership, and must be avoided.” 

While reauthorization allows NFIP insurers to retroactively issue policies for applications received during the shutdown, the measure extends their authority only through Jan. 30, 2026, leaving the program’s fate an open question. Absent a long-term NFIP authorization bill, Congress has now reauthorized the program 34 times since fiscal year 2017. 

Incentivizing risk reduction 

Flood risk was long considered untouchable by private insurers, which is a large part of the reason NFIP exists. While private participation in the flood market has grown in recent years, NFIP remains a critical source of protection for this growing and underinsured peril. 

Beyond providing economic protection for policyholders, the NFIP also plays a critical role in promoting climate resilience, particularly through its Community Rating System (CRS). A voluntary program, the CRS rewards homeowners with premium discounts when their communities invest in floodplain management practices that exceed the NFIP’s minimum standards, with the program’s highest rating qualifying residents for a 45 percent premium reduction. 

After the cancellation of other FEMA-managed initiatives like BRIC, the CRS can help provide relief where still needed. For instance, Jefferson Parish homeowners displaced following Hurricane Ida in 2021 had secured BRIC grants to elevate and reconstruct their homes shortly before the program ended, leaving these projects in limbo. But the CRS now offers residents and businesses more than $12 million in flood insurance savings annually after the parish secured a Class 3 rating – the first of its kind in Louisiana. 

By incentivizing improved building codes, citizen awareness campaigns, and other resilience solutions, the CRS can ensure that vulnerable communities “will continue to benefit from a comprehensive floodplain management and mitigation plan that helps make us more resilient in the face of disasters,” said Jefferson Parish President Cynthia Lee Sheng in a statement. Notably, however, the parish earned its rating mere weeks ahead of the NFIP lapse, which delayed the discounts from appearing in new and renewed policies. 

As climate and weather-related events become increasingly frequent and severe, the success of these investments will depend on proactive strategies informed by timely, granular data. Though NOAA announced it would cease tracking the country’s costliest disasters earlier this year, nonprofit Climate Central aims to fill the gap by rebuilding NOAA’s database and expanding it to track smaller catastrophes, providing insurers and other stakeholders more reliable information to understand individual disasters. 

Taken together, such efforts can help insurers accurately reflect rising risks in insurance pricing while engaging with communities and businesses in solutions to keep coverage accessible. Sustaining this balance involves continuous collaboration between public and private sectors. 

Learn More: 

JIF 2025: Federal Cuts Imperil Resilience Efforts 

Some Weather Service Jobs Being Restored; BRIC Still Being Litigated 

Louisiana Senator Seeks Resumption of Resilience Investment Program 

Nonprofit to Rescue NOAA Billion-Dollar Dataset 

BRIC Funding Loss Underscores Need for Collective Action on Climate Resilience 

Hurricane Helene Highlights Inland Flood Protection Gap 

Executive Exchange: Using Advanced Tools to Drill Into Flood Risk 

Accurately Writing Flood Coverage Hinges on Diverse Data Sources 

Lee County, Fla., Towns Could Lose NFIP Flood Insurance Discounts 

Coastal New Jersey Town Regains Class 3 NFIP Rating 

Homeowners Insurance, Industry Financials, Insurers and the Economy, Market Conditions

IRC: Homeowners’ Insurance Rate Filing Growing Less Efficient

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By William Nibbelin, Senior Research Actuary, Triple-I

The rate-filing process for homeowners’ insurance has become less efficient and effective, a new study by the Insurance Research Council (IRC) shows.

The report – Rate Regulation in Homeowners Insurance: A Comparison of State Systems – analyzed industry data from 2010 through 2024 across all states, including the District of Columbia. The study found that, not only is it taking longer for insurers to get rate increases approved, but the increases are lower than requested, with bigger gaps between the request and the granted amount than had previously been the case.

Key findings:

  • The number of rate filings is growing at a compound annual growth rate of 3.3 percent from 2018 to 2024 nationwide.
  • The average number of days to approval grew from 44 to 63 days.
  • The number of filings withdrawn increased from 2.9 percent of filings to 3.9 percent of filings.
  • The percentage of filings receiving less rate impact than requested grew by more than 10 points.
  • The disparity in approved rate impact grew by nearly 1 point.
  • Market concentration (as measured by the Herfindahl-Hirschman Index, or HHI) decreased by 14.6 percent.
  • The residual share of direct written premium has grown at a compound annual growth rate of 10.5 percent from 2020 to 2024
  • A strong-to-moderate correlation exists between net underwriting losses and premium shortfalls within states and across time.
  • Filing process measures and market outcomes vary by regulatory systems.

During this same period from 2010 through 2024, the homeowners’ insurance industry experienced a net combined ratio over 100 in 10 of the 15 years. Combined ratio – calculated as losses and expenses divided by earned premium plus operating expenses divided by written premium – is a key measure of underwriting profitability. A combined ratio over 100 represents an underwriting loss.

The IRC report includes the determination of a strong correlation between underwriting loss and premium shortfalls, defined as the potential dollar difference between the effective filed rate impact and approved rate impact.

In California, for example, the time to approval exceeds that of the next highest state – New York – by more than four months. California also has the second-fastest-growing residual market share from 2.1 percent in 2019 to 8.2 percent in 2024 and the second-fastest-growing excess and surplus homeowners market share from 0.3 percent in 2010 to 6.3 percent in 2024. This means that, at most, only 85 percent of California homeowners’ insurance is covered by a standard policy.

IRC, like Triple-I, is an affiliate of The Institutes.

Insurers and the Economy

Allstate, Aspen Initiative Seeks to Ease Trust Gap

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By Lewis Nibbelin, Research Writer, Triple-I

Insurance is a trust-based business. Providing safety and security in a risky, unpredictable world is the core function of our industry, which hinges on engendering consumer peace of mind.

Yet trust has become a scarce commodity as U.S. adults report successively lower average levels of trust by generation, with only 34 percent agreeing that “most people can be trusted” in 2018 compared to 46 percent in 1972. Trust in institutions appears similarly bereft, according to a global survey from SAS and Economist Impact that links the current $1.8 trillion protection gap to pervasive distrust in insurers.

To improve public and cross-sector relationships, Allstate and the Aspen Institute recently launched the Trust in Practice Awards, a grant program honoring non-profit organizations that support civic engagement, volunteering, and bridging differences with intergenerational participants. Backed by the Allstate finding that 74 percent of Americans remain optimistic about their community’s future, the initiative aims to broadly recoup trust by first establishing a strong foundation in neighborhoods, schools, and local organizations.

By reversing community distrust – which “undermines democracy, increases anxiety, and reduces personal freedom,” said Tom Wilson, Allstate president and CEO – the program could motivate collective action and resilience efforts on a larger scale, sending ripple effects of greater trust nationwide.

Fueling economic outcomes

Such effects can further stimulate measurable economic growth. A 2025 PwC survey indicates that introducing “trust or safety” features substantially increases engagement and purchase intent, with 72 percent more likely to engage, 68 percent open to new products, and 59 percent open to related merchandise.

Despite clear benefits, trust-building investments continue to face widespread scrutiny as a perceived barrier rather than facilitator of growth, the survey notes. Whereas AI, for instance, might quantifiably boost operational efficiency and reduce costs, pinpointing similar results from specific trust and safety measures can be more challenging, potentially leading organizations to overlook their importance.

Triple-I and SAS centered the insurance industry’s role in guiding these conversations in their 2024 research on ethical AI implementation, highlighting the technology as an opportunity for insurers to educate businesses less experienced with complex safety regulations. Prioritizing data privacy and integrity must occur alongside any innovation, the report emphasizes, to alleviate these concerns for consumers across all industries.

Transparent discussions are also key to combating legal system abuse, valued at $6,664 per family of four in added costs for basic goods and services. Commandeering the trust once associated with insurers, predatory “billboard” attorneys invest billions of dollars annually into advertising inflated settlements that often yield only marginal awards for the injured party, creating a more uncertain and deceptive litigious environment.

To bolster stakeholder education on the reality of legal system abuse, Triple-I founded an awareness campaign that includes brick-and-mortar interstate billboards in Atlanta and Baton Rouge and a consumer guide, co-authored by Munich Re, that explains its economic impacts. A consumer microsite additionally promotes various state reform movements.

Trust is neither automatic nor unilateral. While legal reform momentum and cutting-edge insurance products can help restore affordable and widely available coverage, closing the protection gap will require ongoing coordinated efforts that can translate for modern audiences the industry’s dedication to putting people first.

Learn More:

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Insurers and the Economy

Tariffs, Shutdown Cloud 2026 Insurance Outlook

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By Lewis Nibbelin, Contributing Writer, Triple-I

Current U.S. tariff policies – especially those targeting materials essential for repairing and replacing property after insured events – can complicate assessing and predicting risk. The future of these policies will depend on pending court rulings, creating even more uncertainty for insurers and their customers.

This uncertainty is compounded by a paucity of federal data during the current U.S. government shutdown.

“Normally, as we wrap up Q3, we have enough data as economists, policymakers, and business leaders to start thinking about what the year will look like by the end of it,” said Dr. Michel Léonard, Triple-I Chief Economist and Data Scientist, in a recent interview with Insurance Thought Leadership (ITL) – like Triple-I, an affiliate of The Institutes. “That’s not the case right now.”

In a typical year, Léonard explained, quarter-over-quarter GDP progresses minimally, facilitating more confident quarterly projections. Ongoing trade agreement ambiguity, however, means economists are “flying blind about GDP at the moment.”

Such uncertainty also influences inventory management behaviors, as companies up and down the supply chain that rely on imported goods have decided to stockpile ahead of tariff enactments at a record pace. Though replacement costs continue to rise more slowly than overall inflation, consumers will likely face rising costs as supplies dwindle, which could disrupt the P&C insurance industry’s positive momentum heading into next year.

Personal auto performance, for instance, saw considerable improvement, but reflected consumers purchasing vehicles to circumvent later post-tariff prices, potentially leading to “less growth in the second half of the year and certainly next year,” Léonard said.

Paul Carroll, ITL editor-in-chief, added that companies may delay investing in domestic manufacturing as tariff uncertainty persists, thereby further delaying potential economic boosts. He and Léonard agreed that these factors in combination suggest the full impact of tariffs will require more time to unfold.

Despite an unclear 2026 forecast, Léonard emphasized that insurers appeared to avoid “the worst-case scenarios” this year, demonstrating a “resilient U.S. economy, both in terms of growth and inflation.”

“We’re going to end the year most likely in a better place than we expected, and we should be very happy about that,” he concluded.

A complete transcript of their discussion is available here.

Insurers and the Economy, Regulation, Risk Management, Risk-Based Pricing

Triple-I Brief Explains Benefits of Risk-Based Pricing of Insurance

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By Jeff Dunsavage, Senior Research Analyst, Triple-I

“Risk-based pricing” is a basic insurance concept that might seem intuitively obvious when described – yet misunderstandings about it regularly sow confusion and spark calls for government intervention that would likely do consumers more harm than good.

Simply put, it means offering different prices for the same level of coverage, based on risk factors specific to the insured person or property. If policies were not priced this way, lower-risk drivers would necessarily subsidize riskier ones.

Confusion ensues when actuarially sound rating factors intersect with other attributes in ways that can be perceived as unfairly discriminatory. A new Triple-I Issues Brief sorts out the reasons for such confusion and explains why legislative involvement in insurance pricing is not the answer to rising premiums. In fact, the report says, such involvement would tend to drive premiums up, not down.

Worries about equity

Concerns have been raised about the use of credit-based insurance scores, geography, home ownership, and motor vehicle records in setting home and car insurance premium rates. This confusion is understandable, given the complex models used to assess and price risk. To navigate this complexity, insurers hire teams of actuaries and data scientists to quantify and differentiate among a range of risk variables while avoiding unfair discrimination.

Triple-I’s brief shows how one frequently criticized rating factor for auto insurance – insurance-based credit scores – effectively tracks collision claim frequency.  Drivers with the worst 10 percent of scores have twice as many collision claims as the best 10 percent. The sophisticated tools actuaries and underwriters use ensure fair, accurate pricing, and insurers do everything they can to see that all valid claims are paid on time and in full.

Climate and inflation

Areas that were once less vulnerable to certain natural perils – such as wildfire and hurricane-related flooding – increasingly are being affected by these costly events. Furthermore, more people have been moving into at-risk areas on the coasts and in the wildland-urban interface (WUI), putting more property into harm’s way.

Insurance pricing must reflect these increased risks to maintain policyholder surplus – the funds regulators require insurers to keep on hand to pay claims. In some states, this increased risk – combined with regulatory decisions that make it hard to raise premium rates to the levels needed to adequately meet it – has forced some insurers to reduce their exposure and not write as many policies and even withdrawing from states completely. In these states, not only has homeowners’ coverage become less affordable – in some cases, it has also become less available.

Another factor driving up premiums is inflation. As material and labor costs rise, the cost to repair and replace damaged homes and vehicles increases. If premium rates don’t reflect these increased costs, insurers would quickly exhaust their policyholder surplus. If their losses and expenses exceed their revenues by too much for too long, they risk insolvency.

A role for governments

Policymakers naturally want to address the impact of rising costs – including insurance premiums – on their constituents. A good start would be to help reduce risk by modernizing building codes and incorporating resilience into their infrastructure investments. Reduced risk and less costly damages would, over time, translate into lower premium rates.

Governments also can work with insurers and other stakeholders to incentivize homeowners to invest in mitigation and resilience. The Strengthen Alabama Homes program is a great example of one such collaboration between state government and the insurance industry that has measurably improved results and is beginning to be imitated by other states.

Learn More:

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Artificial Intelligence, Catastrophes, Coastal Property, Disaster Resilience, Emerging Risks, Floods, Hurricane, Industry Awards & Events, Insurers and the Economy, Market Conditions, Technology, Wildfire

ClimateTech Connect NYC: You Just Had to Be There

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I wrapped up my first-ever Climate Week NYC last week at ClimateTech Connect. After their two-day April event in Washington, D.C., I could hardly miss this special half-day update when it was so close to home.

Fifty-plus attendees crammed a room near Grand Central Station, and I immediately spotted familiar faces and had the opportunity to meet with a mix of industry veterans and relative newbies spanning all insurance disciplines, from underwriting and claims to the cutting edge of modeling and artificial intelligence. Top insurance thought leaders and influencers were there to speak on climate-related issues of pressing interest to my industry and everyone it serves. The panel themes and the panelist themselves made it clear from the start that a blog post was not going to do the event justice.

The first panel – Pioneers Shaping the Future of Climate Resilience – was moderated by Francis Bouchard, managing director for climate at Marsh McLennan, whose bona fides include senior positions with Zurich Insurance and the Reinsurance Association of America. Francis moderated a no-holds-barred panel of young insurance leaders: Angela Grant at Palomar, Michael Gulla of Adaptive Insurance, and Valkyrie Holmes of Faura. The energy and expertise of these panelists left me feeling that the industry – in the face of myriad challenges – is being put into good hands.

The next discussion was moderated by Jerry Theodorou, a director at the R Street Institute whose professional background includes roles at Conning, AIG, and Chubb. It featured Dan Kaniewski, managing director and U.S. public sector lead for Marsh McLennan and a former FEMA deputy administrator, and Raghuveer Vinukollu, head of climate insights and advisory for Munich Re. The depth and timeliness of these three experts’ insights made for an engaging and thought-provoking session.

The third panel was both engaging and accessible – a bit surprising to me, given that it consisted entirely of PhDs. Steve Weinstein, CEO of Mangrove Property Insurance led a discussion among Joanna Syroka of Fermat Capital Management, Catherine Ansell of JPMorgan Chase, and M. Cameron Rencurrel at Mercury Insurance on not only “Why Science Needs to Be in the Boardroom,” but HOW young scientists can find their way there and decide IF that’s where they want to be.

Between these panels were presentations from representatives of several insurtechs who shared their data-driven solutions focused on understanding and addressing climate-related panels. All this in a period of about three hours (not including the networking reception afterward). Despite all the information shared, the event did not feel at all rushed.

If you weren’t able to make it and are feeling a bit left out, don’t fret! ClimateTech Connect 2026 will be held in Washington, D.C., on April 8 and 9, 2026.

Business Risk, Catastrophes, Cyber Risk, Disaster Preparedness, Disaster Resilience, Emerging Risks, Insurers and the Economy, Market Conditions, Technology

As Global Risks Evolve,
So Must Insurance

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By Lewis Nibbelin, Contributing Writer, Triple-I

Economic shifts, geopolitical uncertainties, cybersecurity trends, and mounting climate perils have created an increasingly severe and interconnected risk crisis, according to participants in a members-only Triple-I webinar.

In an environment constrained, for instance, by frequent natural disasters and rising replacement costs, risks no longer develop in isolation. They collide with and compound each other. Their combined impact exceeds the sum of individual risks’ effects. Such interdependence complicates identifying, let alone mitigating, the forces underpinning a specific risk.

“Under this new system that’s emerging, risk can propagate very rapidly through a host of otherwise disconnected networks,” TradeSecure president and cofounder Scott Jones told webinar host Michel Léonard, Triple-I’s Chief Economist and Data Scientist.  “This new reality fundamentally challenges the core principles that insurance has relied on for centuries.”

Jones emphasized the growing unpredictability of risk on a global scale, particularly as nations impose export controls, sanctions, investment restrictions, and tariffs for purposes like economic competition. Companies with global footprints may struggle to ascertain these interwoven, sometimes competing regulations, creating compliance concerns and potentially exacerbating supply-chain disruptions.

With the frequency and severity of U.S. cyber claims on the rise, cyberattacks also carry substantial transnational implications. Sophisticated ransomware encounters can exploit businesses of all sizes, propelling privacy liability claims and related third-party litigation.

TradeSecure vice president and cofounder Michael Beck explained how the almost universal accessibility of malware – harnessed by criminal syndicates, activist groups, or even lone hackers – presents “a new class of systemic non-physical disruption” that could undermine “the entire system’s liquidity and stability.”

“A coordinated non-state cyberattack wouldn’t just steal money – it could stop the flow of money, causing many transaction failures and possibly triggering a wave of claims far beyond what traditional cyber policies are designed to handle,” Beck said.

Though insurers as well as business owners and consumers consider cyber incidents a chief risk concern, personal cyber take-up rates remain low, with the broader cyber insurance market facing its third consecutive year of declining rates. Misunderstandings surrounding cyber risk and benefits of coverage fuel this discrepancy, revealing a gap between agent perceptions of product value and that of their customers.

Learn More:

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Tariff Uncertainty May Strain Insurance Markets, Challenge Affordability

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Disaster Preparedness, Disaster Resilience, Homeowners Insurance, Insurers and the Economy, Legal Environment, Market Conditions, Regulation

Calls for Insurance-Price Legislation Would Hurt Policyholders, Not Help

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Increased legislative involvement in regulating homeowners’ insurance pricing and rates – as recently called for by some officials in Illinois – would hurt insurance affordability in the state, rather than helping consumers as intended, Triple-I says in its latest Issues Brief.

Rising premiums are a national issue. They reflect a combination of costly climate-related weather events, demographic trends, and rising material and labor costs to repair and replace damaged or destroyed property. Average insured catastrophe losses have been increasing for decades, fueled in part by natural disasters and population shifts into high-risk areas. More recently, these and other losses to which the property/casualty insurance industry is vulnerable were exacerbated by inflation related to the pandemic and Russia’s invasion of Ukraine. Tariffs and changes in U.S. economic policies have since put even more upward pressure on costs.

These increasing costs – if not addressed – threaten to erode the policyholder surplus insurers are required to keep on hand to pay claims. If surplus falls below a certain level, insurers have no choice but to increase premium rates or adjust their willingness to assume risks in certain areas.

To avoid this, many insurers have filed with state regulators for rate increases – requests that often meet with resistance from consumer advocacy groups and legislators. Illinois would not be the first state to try to ease consumers’ pain by constraining insurers’ ability to accurately set coverage prices to reflect increasing levels of risk and costs.

Practicality, not politics

Such efforts, while perhaps politically popular, confuse one symptom (higher premiums) of a growing risk crisis with its underlying cause (increasing losses and rising costs). Using the blunt instrument of legislation to address the complexities and sensitivities of underwriting and pricing would tend to disrupt the market and further hurt insurance affordability – and, in some areas, availability.

Rather than target insurers with misguided legislation, the brief says, states would be wiser to work with the industry to improve their risk profiles by investing in mitigation and resilience. The brief describes the causes of higher premium rates nationally and in Illinois and how other states have successfully collaborated to address those causes and reduce upward pressure on – and eventually bring down –premium rates.

“Triple-I welcomes the opportunity to collaborate with state policymakers to develop constructive approaches to risk mitigation and resilience that will benefit communities and consumers,” the brief says.

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