A recent estimate by industry trade group Insurance Information Institute puts the national average premium at $1,398/yr.  From 2017 to 2020 premium increases averaged 11.4%/yr far outpacing the broader 7.9%/yr rate for all goods and services during the same period.

2021 has provided similar upward pressure on premiums with an average of 6.6% during q3 up from 4.8% during q2.  High-risk markets such as Florida, California and Louisiana have seen increases up to 25%.

What’s behind the pricing pressure?

On the income side insurers have earned lower rates of return on invested premiums as interest rates remain at or near all-time lows.

On the expense side insurers have paid out more in claims as damage from hurricanes, wildfires and similar events has totaled more than $370 billion since 2017.

What’s more insurers face rising input costs that have increased the costs of rebuilding.  The labor market is tight as many workers opted to stay home and receive a “stimulus” check.  The price of raw materials such as lumber (up 42% since September 2017) remains elevated due to supply chain disruptions.

Insurance companies have sought and often received permission from state regulators for premium increases leaving homeowners with oftentimes unpalatable options:

  • assume more risk (e.g. increased deductibles, coverage reductions)
  • spend on improvements to mitigate damage (e.g. hurricane shutters, elevating utility systems)
  • sell the family home and move to an area where risks aren’t as high