MALVERN, PA — Over the last two decades, the average cost of claims per insured home in the United States has risen faster than inflation, spurred by natural disasters, higher repair costs, supply chain disruptions, and population migrations into high-risk areas. These findings come from a new research brief, Homeowners Insurance Affordability: Countrywide Trends and State Comparisons, released by the Insurance Research Council (IRC), an affiliate of The Institutes.
The report underscores a troubling trend for homeowners. Insurance affordability, measured through the IRC’s Affordability Index, has declined steadily as insurance expenditures outpace income growth. Between 2001 and 2022, homeowners’ insurance costs rose from 1.19% to 2.09% of median household income. By 2024, this figure is projected to reach 2.4%, marking a significant affordability challenge.
“This steady upward trajectory signals ongoing challenges in the insurance market,” said Dale Porfilio, president of the IRC. “From natural disasters and legal system abuse to escalating repair costs and fraud, the pressures on insurance costs are significant, and they are driving premiums higher for consumers.”
Geographic Disparities in Affordability
The report also reveals substantial geographic variation in affordability. States like Utah, Oregon, and Alaska ranked as the most affordable in 2022, while Louisiana, Florida, and Mississippi were among the least affordable. However, Florida saw slight improvement in recent years thanks to legislative reforms in 2022 and 2023, which addressed property claim lawsuits and encouraged private insurer participation. These changes, while promising, remain early in implementation.
Drivers of Increasing Costs
Multiple factors are pushing insurance premiums higher. These include the frequency and severity of natural disasters such as hurricanes and wildfires, rising non-catastrophe claims, legal system abuse, and costs linked to fraud. Each state faces unique pressures based on its exposure to natural hazards and local legal environments.
“Understanding what’s driving insurance costs at the state level can help leaders make informed decisions to protect consumers and ensure continued access to essential coverage,” added Porfilio, who is also chief insurance officer at the Insurance Information Institute.
The report’s findings pose critical questions for policymakers and industry leaders. Rising premiums and affordability concerns underscore the need for strategies aimed at mitigating risk, enhancing consumer protection, and maintaining accessible coverage for all homeowners.
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