Homeowners Insurance Costs Rising Faster Than Inflation
MALVERN, PA — A recent research brief from the Insurance Research Council (IRC) has revealed that the average cost of claims per insured home in the United States has been rising faster than inflation over the past two decades. This trend is attributed to various factors including natural disasters, higher repair costs, supply chain disruptions, and population migrations into high-risk areas.
The IRC’s report, titled ‘Homeowners Insurance Affordability: Countrywide Trends and State Comparisons,’ highlights a concerning decline in insurance affordability. The organization’s Affordability Index shows that insurance expenditures have consistently outpaced income growth. Between 2001 and 2022, homeowners’ insurance costs increased from 1.19% to 2.09% of median household income, with projections indicating this figure will reach 2.4% by 2024.
“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.”
The report also reveals significant geographic disparities in affordability. States such as Utah, Oregon, and Alaska were ranked as the most affordable in 2022, while Louisiana, Florida, and Mississippi were among the least affordable. Florida did show slight improvement in recent years following legislative reforms in 2022 and 2023 aimed at addressing property claim lawsuits and encouraging private insurer participation.
Multiple factors are contributing to the increase in insurance premiums, including the frequency and severity of natural disasters like hurricanes and wildfires, rising non-catastrophe claims, legal system abuse, and costs associated with fraud. Each state faces unique challenges 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 raise critical questions for policymakers and industry leaders regarding the need for strategies to mitigate risk, enhance consumer protection, and maintain accessible coverage for all homeowners.
