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 household income.
“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:
Triple-I Brief Explains Benefits of Risk-Based Pricing of Insurance
Calls for Insurance-Price Legislation Would Hurt Policyholders, Not Help
Illinois Lawmakers Reject Risk-Based Pricing Challenge
Calif. Risk/Regulatory Environment Highlights Role of Risk-Based PricingIllinois Bill Highlights Need for Education on Risk-Based Pricing of Insurance Coverage
