By Max Dorfman, Research Writer, Triple-I
Homeowners insurance costs have continued to consistently rise in the wake of the pandemic, alongside several other challenges, according to a new Triple-I Issues Brief.
The COVID-19 pandemic and Russian invasion of Ukraine sparked inflation – particularly with regard to replacement costs due to material shortages. Replacement-cost inflation has been exacerbated by a tight labor market. Even before the pandemic, loss costs had been rising steadily for some time, leading to homeowners insurance premiums climbing consistently from 2001 to 2021, according to the Insurance Research Council (IRC).
These cost factors, combined with rising losses related to natural catastrophes, have contributed to insurance affordability and availability issues, which vary by state. Disaster-related losses have increased over the past 30 years, due mostly to increasing severity of hurricanes and convective storms.
The brief notes that these costs surpassed household income growth, leading to decreased insurance affordability for many U.S. consumers. As expected, disaster-prone states have the least affordable homeowners insurance. The IRC ranks Florida as the state with the least-affordable coverage in the country.
Additionally, legal system abuse, which includes false claims of damage to homes. This has been a common issue in disaster-prone areas, where claims of roof damage, in particular, have substantially increased insurance costs.
The brief states that consumers and policymakers should be cognizant of the dynamics underlying these price shifts and understand why insurers must be forward looking in their approach to pricing these policies.
Learn More
Florida Homeowners Premium Growth Slows as Reforms Take Hold, Inflation Cools
IRC: Homeowners Insurance Affordability Worsens Nationally, Varies Widely By State
Homeowners Insurance Costs Exceeded Inflation From 2000 to 2020