The average cost of claims per insured home in the United States has increased at a rate faster than inflation over the past 20 years, according to a new research brief released by the Insurance Research Council (IRC), an affiliate of The Institutes.
The study, Homeowners Insurance Affordability: Countrywide Trends and State Comparisons, attributes the rise to multiple factors, including natural disasters, legal system abuse, fraud, escalating home repair expenses, and population shifts into disaster-prone areas. The report further reveals that homeowners’ insurance costs have risen disproportionately in comparison to household incomes, leading to record-low affordability.
“From natural disasters and legal system abuse to escalating repair costs and fraud, the pressures on home insurance costs are significant, and they are driving premiums higher for consumers,” said Dale Porfilio, president of the IRC.
The IRC introduced an Affordability Index to measure the ratio of average homeowners’ insurance expenditures to median household income. In 2001, US households allocated 1.19% of their income toward homeowners’ insurance. That percentage climbed to 2.09% in 2022 and is projected to reach 2.4% by the end of 2024.
“This steady upward trajectory signals ongoing challenges in the insurance market,” Porfilio said. He also serves as the chief insurance officer at the Insurance Information Institute (Triple-I).
The research brief identifies geographic variations in affordability. In 2022, Utah, Oregon, and Alaska ranked as the most affordable states, while Louisiana, Florida, Mississippi, Oklahoma, and Arkansas were the least affordable. Florida, despite remaining the second least affordable, experienced minor improvements compared to 2021.
The report credits these improvements to legislative reforms in Florida during 2022 and 2023. These reforms resulted in fewer property claim lawsuits and a modest increase in private insurer participation. However, the IRC noted that these developments have not yet been fully reflected in the analyzed data.
Affordability is driven by a range of state-specific cost factors, including claim frequency and severity, legal and fraud-related expenses, and exposure to environmental hazards such as hurricanes, wildfires, and hailstorms.
“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,” Porfilio said.
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