Home Insurance Crisis: What's driving skyrocketing premiums & policy non-renewals?

WASHINGTON (SOA) — Devastation caused by natural disasters, like wildfires and hurricanes, is hitting the home insurance industry hard; but the impact is being felt far beyond just Florida and California.

Spotlight on America discovered skyrocketing rate increases across the country and a record number of homeowners being dropped from their coverage. National Investigative Correspondent Angie Moreschi looks at why and what it could mean for you.

Weather-related catastrophes

Destruction caused by the California wildfires has left countless families devastated. Residents like Alex Brucker, who lived in the Pacific Palisades, lost everything.

“The house is completely gone. Everything is gone. It’s all leveled,” Brucker said.

The Bruckers are among thousands whose homes burned to the ground. It's estimated insured losses from the wildfires could approach $40 billion, just the latest natural disaster exposing a growing crisis in home insurance.

U.S. Senator Sheldon Whitehouse of Rhode Island is warning Americans about the escalating threat.

“It's extremely dire. You're seeing insurance companies go bankrupt, you're seeing insurance companies abandon states, you're seeing insurance companies abandon long-standing customers, you're seeing prices quadruple,” Whitehouse told Spotlight on America.

Weather-related catastrophes like hurricanes and wildfires are causing upheaval in the insurance market, according to the National Centers for Environmental Information, which reports that billion-dollar catastrophic weather events are on the rise. But it's not limited to just high-risk coastal areas.

Record rate of policy non-renewals

As chair of the Senate Budget Committee over the past two years, Whitehouse oversaw an investigation and hearings into the impact of climate-related risk on the home insurance market.

“Suddenly you see the same explosive growth in non-renewal rates,” Whitehouse said during a budget committee hearing in December, where the results of the committee’s two-year investigation were discussed.

The final report, “Next to Fall: The Climate-Driven Insurance Crisis is Here—And Getting Worse,” zeroed in on the skyrocketing rate of policy non-renewals for homeowners.

The report showed that coastal states, considered high-risk states, experienced the highest rate of non-renewals:

• Florida (#1)
• Louisiana (#2)
• North Carolina (#3)
• California (#4)

But it also exposed areas you might not expect, including:

• Massachusetts (#5)
• New Mexico (#11)
• Utah (#16)
• Nebraska (#17)
• Montana (#18)

Mark Friedlander, Corporate Communications Director for the Insurance Information Institute, an industry association, told Spotlight that insurance companies had to make business decisions based on risk in areas where policy non-renewals are high.

“Unprofitability was not sustainable,” Friedlander said. “If they feel they have too much risk in a certain area, they're going to pull back and that's going to lead to non-renewals.”

Skyrocketing premiums

Home insurance rates across the country have also spiked, with 33 states seeing double-digit rate increases in 2024, according to S&P Global Market Intelligence's RateWatch application.

The highest increase was in Nebraska, up 22.7%. Five other states also saw premiums rise by more than 20% in 2024: Montana, Iowa, Minnesota, Utah and Washington.

Even more striking, though, were the cumulative increases since 2019, with the highest increases approaching 80% over five years.

• Colorado (up 78.5%)
• Utah (up 75.1%)
• Nebraska (up 73.2%)
• Arizona (up 70.1%)
• Minnesota (up 67%)
• Iowa (up 65.9%)

Spotlight asked Friedlander why states, that are not as high risk as California and Florida, are seeing such big increases. Once again, he pointed to the escalating number and intensity of severe weather events.

“These states are seeing other types of natural disasters, particularly severe convective storms. Those are the storms that generate tornado outbreaks, hailstorms, which cause major damage. But then, you look at states like Utah and Colorado, they also have wildfire risk,” Friedlander explained.

Besides natural disasters, Friedlander says other driving factors contributing to premium increases, include litigation over claims and rebuilding costs, like lumber and labor– up more than 55 percent over the past five years.

Sounding the alarm

Senator Whitehouse is sounding the alarm that these events could trigger spiraling failures in the real estate market.

“We're headed towards a pretty significant cascade from failed insurance markets to failed mortgage markets to crashed property values,” Whitehouse told Spotlight.

Whitehouse warns that if homeowners can’t find affordable insurance, banks won’t lend them money to buy homes, and it could lead to another market meltdown like the country experienced in 2008.

“I'm very concerned about it. All the signals are there. Every alarm bell is ringing,” Whitehouse said.

Homeowners who are dropped by private carriers can turn to state-backed insurers of last resort, like the FAIR plan in California or Citizens Insurance in Florida, but that's often more expensive and doesn't cover total losses.