Home Insurance Rates Increase Follow the (Disaster) Pattern

Mike Sorohan msorohan@mba.org

April 26, 2019

Home insurance rates have increased in every state over the past decade--but the biggest increases have occurred in states one might not associate with high-profile disasters.

An analysis by QuoteWizard, Seattle, found in some states, home insurance rates have risen by as much as 88 percent over the past decade. The main culprit: increased frequency and severity of natural disasters. But rather than large events such as coastal hurricanes, the analysis said nearly two thirds of home insurance losses come from wind, hail and water damage, with regions such the Midwest experiencing these weather events mostseverely, leading to higher home insurance rates.

"Every year in the United States, natural disasters account for tens of billions of dollars in damages," the analysis said (https://quotewizard.com/news/posts/home-insurance-rate-increase-by-state). "A significant portion of those damages falls on the shoulders of insurance companies. When insurance companies experience huge loss from natural disaster-related claims, they compensate for that loss with an increase in home insurance rates."

Other key findings:

--Eleven of the top 15 states were in the larger Tornado Alley boundaries (Oklahoma, Kansas, Colorado, Nebraska, Arkansas, Louisiana, Minnesota, Kentucky, South Dakota, Mississippi and Texas).

--The average home insurance rate hike for those top Tornado Alley states in the past decade came to $580, an average increase of 67 percent. In 2016, those states paid on average $1,509 per year for home insurance.

--Other than Rhode Island and Connecticut, Northeastern states sit lower on rate increases, despite heavy rain, hail and snowstorms. The average rate increases for New Jersey, New York, Maryland, Virginia, West Virginia, Maine, New Hampshire, Delaware, Pennsylvania, Vermont and D.C. was $274, an average 39 percent increase. These states paid an average of $1,008 in 2016.

--Western states saw the lowest rate increases, including Nevada, California, Alaska, Utah, Oregon, Arizona, Hawaii, Idaho and Washington. The average rate hikes for these states was $167, an average 30 percent increase. These states paid an average of $821in 2016.

--While California saw the second lowest rate increases since 2007 (only $75), it already pays some of the highest rates in the country ($1,000). Florida pays the most at $1,918, but only experienced a $284 spike in the past decade, a 25 percent increase.

QuoteWizard used data from the National Association of Insurance Commissioners on insurance trends and stats. It noted, for example, that average home insurance premiums in Oklahoma jumped by 78 percent from 2007 to 2016, or an extra $821 per year. The main culprit: natural disasters. According to the Federal Emergency Management Agency, Oklahoma has declared 186 natural disasters--the second most in the country behind California. Neighboring states such as Kansas and Colorado also saw jumps in rates.

For Colorado, the result is more interesting from a housing perspective. The analysis said average home insurance rates in Colorado jumped by an annual $620 from 2007 to 2016.

"Increases in premiums for homeowners insurance in the last 10 years have been the result of the increasing number of natural disasters in that time," said Vincent Plymell, Communications Manager with the Colorado Division of Insurance. He noted tornadoes, wildfires and hail storms as the main culprits, specifically the 2008 Windsor tornado, the 2012 Waldo Canyon fire and the 2013 Black Forest fire. The two fires alone accounted for over $850 million in estimated insured losses.

Adding to those costs in Colorado, Plymell said, are the increased size and complexity of many homes, as well as increased costs for building materials. "On top of that, Colorado is one of many states experiencing a shortage in construction workers," he said. "After a natural disaster, a lack of qualified contractors drives the cost of many claims."

The report said Kentucky topped the list for highest percentage increase, 88 percent, from 2007 to 2016, followed by South Dakota.

A separate study by Columbia University found increased tidal flooding could cost Texas homeowners $76.4 million in potential property value, with potential losses reaching as much as $15.9 billion across 18 coastal states.

Analysts examined nearly three million Texas coastal properties. Between 2005 and 2017, it reported homes in Galveston lost $9.1 million in potential value.

"Along the state coast, sea level is up to 18 inches higher than it was in 1950, and is quickly accelerating," the report said. "The annual loss may not hurt property owners now, but could have substantial long-term effects."

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