The rising cost of homeowners insurance is reshaping the market, driven by a combination of severe weather events and increasing development in disaster-prone areas. Insurance agents are navigating a challenging landscape as rate increases, policy restrictions, and nonrenewals become more widespread.
The Role of Severe Weather and Development
Collin County, Texas, serves as a microcosm of the pressures facing the industry. Home to four of the nation’s fastest-growing cities, the region has experienced 12 hailstorms this year alone, resulting in an estimated $400 million in damage. This pattern is mirrored across the country, as more homes are built in areas prone to storms, wildfires, and other natural disasters.
According to Swiss Re, insured losses from U.S. storms have grown 8% annually for more than a decade, fueled by:
- Inflation, which accounts for over a third of the rise.
- Development in high-risk areas, which is a major driver.
- Climate change, contributing to about an eighth of the increase.
Hailstorms, in particular, are a significant factor, responsible for 50% to 80% of thunderstorm-related insured losses.
Premiums and Policy Restrictions on the Rise
The financial toll is hitting both insurers and homeowners hard:
- Home insurance premiums in Texas have increased by an average of 55% since 2019, outpacing the national average of 45%.
- Hail and wind deductibles have doubled in many storm-prone regions, with policyholders now facing higher out-of-pocket costs. For example, a $500,000 home in Texas may now require a $10,000 deductible for wind or hail damage.
- Policies are increasingly limited, with coverage adjustments that reduce roof replacement benefits or base payouts on the roof’s age.
These trends, once confined to Florida, Louisiana, and California, are spreading to states such as Texas, Colorado, Illinois, Iowa, and Michigan.
Nonrenewals and Bundling Conditions
To mitigate exposure, insurers are scaling back on policies in high-risk states:
- Progressive reduced its home insurance policies in “volatile weather states” by 9% during a three-month period this year while expanding policies by 19% in lower-risk areas.
- Some insurers are requiring customers to bundle home and auto policies to secure coverage, further complicating options for homeowners.
The Hail Impact: A Growing Concern
Hail has emerged as a major challenge for insurers:
- Insured hail claims have nearly doubled, increasing from 1.5 million in 2022 to 2.8 million in 2024, according to Verisk Analytics.
- Areas such as Texas, Colorado, Missouri, and Nebraska are at the forefront of these losses, with hail damage per home significantly exceeding the national average.
Regions like Collin County, sitting within the Dallas-Fort Worth area, have become hail hotspots. Other urban centers identified as high-risk include Houston, Denver, Chicago, and St. Louis.
What Lies Ahead for Homeowners Insurance
The consensus among industry leaders is that the property insurance market will remain challenging:
- Premiums are expected to rise by double digits nationally in 2024.
- Insurers are leveraging satellite technology and selective underwriting practices to manage risks.
- Homeowners in disaster-prone areas will likely face continued policy restrictions, higher deductibles, and reduced payouts for severe weather losses.
As severe weather and development trends reshape the landscape of homeowners insurance, agents play a critical role in guiding clients through these challenges. Staying informed about regional trends and policy changes is essential to providing value and support in an increasingly complex market.