Condominium Global host and FOX News real estate contributor Katrina Campins weighs in on February housing statistics and NAR’s proposed new commission rules.
A new Moody’s report says homeowners are struggling with higher premiums as companies that offer homeowners insurance seek to mitigate rising losses from weather-related incidents and inflation that are hurting profits. They say they are feeling financial pain.
report found homeowners insurance company On average, insurance companies pay out more claims than they receive in premiums, with the so-called combined ratio reaching 101.3% over the past 10 years and exceeding 100% every year since 2020. Increased premiums charged to homeowners by insurance companies to maintain profitability amid rising costs.
“The past five years (2019 to early 2024) have seen double-digit interest rate increases in most parts of the country,” said Evelyn Orcas Salazar, AVP analyst in Moody’s Ratings’ Financial Institutions Group. ” he told FOX Business. “In 2023, 80% of countries saw double-digit interest rate increases of up to 30%, with higher ceilings in regions more prone to weather-related risks.”
Much of the increase in payments is due to storm damage and higher costs of materials needed for repairs and rebuilding. damaged property.
Rising home insurance premiums will put more inflationary pressure on Americans
Population growth in states such as Florida, which face the threat of hurricanes, is contributing to an increase in homeowners’ insurance claims. (Eva Marie Uzcategui/Bloomberg via Getty Images/Getty Images)
In 2023, property and casualty insurance companies reported $58 billion in losses from severe storms, which Moody’s noted exceeded both the 10-year average and the previous record set in 2020. This came a year after Hurricane Ian caused an estimated $52.5 billion in insured losses. , according to Aon.
inflation pressure Construction costs and labor costs have increased in recent years, contributing to the dilemma faced by insurance companies and homeowners.
Average hourly wages have increased by more than 20% since 2018. construction materials Costs rose sharply in 2021 after primarily following labor costs, with the producer price index remaining above 40% compared to 2018.
US home prices have soared 47% since the beginning of 2020
Wildfires like the one that devastated Lahaina, Hawaii, have also devastated homeowners in western states such as California and Colorado. (Justin Sullivan/Getty Images/Getty Images)
One reason homeowners insurance payments are higher in disaster-prone areas is that most of these areas have experienced population growth in recent years, resulting in more homes being insured. is.
Moody’s points out that: population of california From 2019 to 2023, the population decreased from 39.4 million to 39 million, but Texas’ population increased from 28.9 million to 30.5 million over the same period, and Florida’s population increased from 21.5 million to 22.6 million. increased. Other states, including Colorado, Louisiana, and Oklahoma, saw minimal population changes.
The proportion of US mortgages deemed to be in ‘severe crisis’ rises
In some cases, insurance companies are withdrawing from providing homeowners insurance in disaster-prone areas. (Thomas Simonetti of The Washington Post via Getty Images/Getty Images)
The report also notes that “changes in claims resolution practices and litigation are driving up claims costs.” Most homeowners insurance policies renew annually and rate increases may require regulatory approval, leading to increased claims costs and until insurers have a chance to adjust pricing. There will be a time lag.
Some insurance companies have restricted operations in disaster-prone areas or stopped offering insurance policies to homeowners as a way to stem losses, which has led to This creates additional difficulties for homeowners who want to protect themselves from catastrophes.
“We’re seeing some setbacks in production capacity,” Salazar said. “Companies are limiting their growth or exiting certain areas if they cannot meet their profit targets. This is especially the case in California, where the interest rate process is much more difficult. Major companies are reducing production capacity and restricting new business in order to rebalance their companies.” “
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Other insurers are moving into excess and surplus markets, where they have more flexibility in setting rates based on the unique risks faced by policyholders.
