In 2022, U.S. insurers paid out $99 billion in claims due to natural disasters, making it the fifth most expensive year on record for insurance losses. [1]
To help pay for it all, insurance companies appear to be passing more of these costs onto customers than ever before. From May 2022 to May 2023, home insurance policy premiums increased by an average of 21% at renewal, according to the 2023 Policygenius Home Insurance Pricing Report.
Home insurance prices were up an average of 21% between May 2022 and May 2023
Homeowners insurance premiums in the U.S. increased an average of 21% nationally from May 2022 to May 2023, according to our analysis of 17,401 active policies quoted for renewal. Our latest findings are a continuation of insurance pricing trends we reported in last year's 2022 Home Insurance Pricing Report, which found that home insurance prices increased an average of 12% nationally from May 2021 to May 2022 — faster than the record-breaking 8.6% rate of inflation during that same period.
In all 44 states (plus Washington, D.C.) that we analyzed for this report, the average premium increase from May 2022 to May 2023 was higher than the average increase from the previous year. And in 26 states, average home insurance premiums were up more than 20% between May 2022 and May 2023. For context, no state’s average premium increased more than 19% from May 2021 to May 2022.
Between May 2022 and May 2023, Florida homeowners faced an average premium increase of 35% at renewal, followed by Idaho at 31%, Colorado at 30%, South Dakota at 28%, and Louisiana, Texas, and Oklahoma at 27%, according to our analysis. Several of these states have dealt with an increase in natural disaster losses and dwindling insurance options over the last few years.
To make sure that we weren’t reporting on a small sample size, we limited our analysis to 44 states (plus Washington, D.C.) with a statistically significant number of policies. You can read our entire methodology below.
Where have home insurance premiums increased the most over the last two years?
Comparing the average original premium (before being quoted for renewal) on customer policies renewed between May 2021 and May 2022 to the average quoted premium on customer policies renewed between May 2022 and May 2023, we found that home insurance prices increased an average of 35% nationally.
The average increase over two years for each state is based on 27,156 total policy renewals between May 20, 2021 and May 20, 2023. Roughly 54% of these renewals are from returning customers who renewed their policy in both one-year periods that we analyzed for this analysis, while the rest are from customers with a total of one policy renewal during that span.
Florida
Home insurance prices are increasing faster in Florida than any other state. On average, premiums in the Sunshine State are up 35% compared to a year ago, according to our analysis. And when comparing the average original premium on policies quoted for renewal between May 2021 and May 2022 to the average quoted premium on policies that were quoted for renewal between May 2022 and May 2023, we found that home insurance prices in Florida were up an average of 68% over two years.
Florida’s home insurance market has faced enormous headwinds in recent years, as insurance providers have had to simultaneously deal with a wave of litigation-related losses from questionable roof repair claims, the second costliest disaster ever in Hurricane Ian, and ongoing financial uncertainty due to climate change. [2] [3] [4] These challenges have caused many Florida property insurers to go insolvent in recent years, further limiting the availability of affordable insurance options for homeowners.
New Mexico
With an average increase of 47% from May 2021 to May 2023, the average home insurance premium has skyrocketed in New Mexico over the last two years, according to our findings. In the last year alone, insurance premiums on the policies we analyzed increased an average of 22%. From May 2021 to May 2022, insurance prices on the policies we looked at increased an average of 14%.
The recent spike in home insurance costs comes in the midst of New Mexico’s largest wildfire in recorded history. From April 6 to August 21, 2022, the Hermits Peak/Calf Canyon Fire burned hundreds of homes and 341,735 acres in Northern New Mexico, leading Congress to set aside nearly $4 billion at the end of 2022 to pay claims from the fire. [5] [6]
Ongoing concerns about the state’s wildfire risk have many insurance providers reportedly no longer providing home insurance in large areas of the state, potentially leaving homeowners in New Mexico with fewer and pricier options. [7]
Colorado
With an average premium increase of $641, or 46%, between the average initial premium on policies renewed from May 2021 to May 2022 and the average quoted renewal premium from May 2022 to May 2023, Colorado home insurance prices have surged over the last two years.
In 2021, Colorado insurers were approved for roughly 134 home insurance rate increases, followed by 139 in 2022. For context, insurers were approved for a total of 46 home insurance rate increases in 2020. With 47 approvals already in 2023, homeowners insurance in Colorado may continue to get more expensive. [8]
Insurance availability is also becoming a problem in Colorado. Since last year, nearly three-quarters of the state’s insurance companies have reduced their exposure in the market due to record wildfire-related losses, including last year’s Marshall Fire. [9] [10] This has made it more difficult for homeowners to find coverage altogether, let alone affordable premiums.
Idaho
Homeowners in Idaho have experienced significant rate hikes over the past year, largely due to the state’s increasing wildfire risk and rising home replacement costs. We found that for the customers we analyzed, the average premium that homeowners were quoted at renewal between May 2022 and May 2023 was 46% higher than the average original premium on policies we analyzed that renewed between May 2021 and May 2022.
Rising insurance costs in Idaho may be due to carriers like AIG pulling back coverage in the state due to its high wildfire risk, and higher home rebuilding costs due to sustained shortages of home construction supplies and inflation. [11]
The Idaho Department of Insurance approved roughly 25% more home insurance rate increases from insurance companies in 2021 and 2022 than they did in 2020. And as of June 2023, the department has approved over 30 rate filings. [12]
Texas
A year after we reported that 1,033 Texas homeowners saw an average premium increase of 16%, we found that 1,815 homeowners faced an increase of 27% from May 2022 to May 2023. Altogether, we estimate that home insurance in Texas is around 46% more expensive on average compared to two years ago.
In 2022, the Texas Department of Insurance approved 152 home insurance rate increases from insurance companies, over 50% more than the 72 it approved in 2021. [13]
Why home insurance rates continue to climb in 2023
With home insurance price increases expected to continue for the rest of 2023 and beyond, there are a number of factors contributing to this new normal.
More extreme weather and climate disasters
From 2000 to 2009, the U.S. experienced 67 climate or weather events (around 7 each year) exceeding $1 billion in damage, according to the National Oceanic and Atmospheric Administration (NOAA). The following decade, from 2010 to 2019, saw these events nearly double in frequency to 131 (around 13 each year). And since 2020, there have already been 72 billion-dollar events (around 20 each year). [14]
While the total number of natural disasters in the U.S. in 2022 was about equal to the annual average over the previous 10 years, it featured the second costliest storm ever in Hurricane Ian. [15] [16]
The current scientific consensus is that greenhouse gas emissions are responsible for rising land and ocean temperatures, which alters climate patterns and makes natural disasters like Ian worse. [17] Furthermore, construction prices have skyrocketed in recent years due to inflation and supply-chain issues, driving up the cost of each claim after a disaster.
The changing climate has had a particularly large impact on the insurance industry. With much of the increase in extreme weather occurring in highly populated and developed areas, insurance companies are paying out more in insurance claims than ever before. [18] [19] As a result, insurers are increasing rates both to reflect the actual risk of the exposures they insure and to remain profitable.
Fewer options for home insurance shoppers
While some insurance companies are increasing premiums on their policyholders to account for risks associated with climate change, others have reduced their exposure in high-risk areas.
State Farm and Allstate, two of California’s largest home insurance providers, announced earlier this year that they were no longer taking on new customers in the state due to increased wildfire risk and challenging market conditions. [20] And in Florida, nine property insurance providers have gone out of business since the beginning of 2021 due to financial insolvency. [21]
When there are fewer insurance companies competing in a particular area, the ones remaining often implement stricter underwriting criteria and increase rates to reflect the higher demand, resulting in higher premiums for homeowners.
Inflation and supply-chain issues
The cost of residential construction is up 34% since March 2020, according to the U.S. Bureau of Labor’s Producer Price Index. [22] This is due in large part due to sustained inflation, supply-chain issues, and labor shortages from the COVID-19 pandemic.
Because the dwelling coverage portion of homeowners insurance is based on the cost to rebuild the home from the ground up, including the price of lumber, roofing, and other raw materials, the amount that insurers are responsible for paying out on each claim has also gone up. As a result, insurers have increased premiums to offset the higher loss ratios created by inflation.
What homeowners can do about rising costs, fewer options in 2023
While some may find their insurance is too expensive, a great deal of homeowners are struggling to find any coverage, period. Here are some steps homeowners can take to make home insurance more affordable and accessible.
3 steps to take if your insurance is too expensive
Compare policies through an independent marketplace. Homeowners should aim to re-shop their home insurance each year to make sure they aren’t missing out on more affordable or better coverage with a different provider.
Look for insurance bundles and other potential discounts. Most insurance companies offer several ways to save, such as bundling discounts if homeowners purchase both home and auto insurance through the same company or protective device discounts if they take steps to make their home safer.
Consider a high-deductible policy — just not too high. Choosing a high policy deductible is one of the easiest ways for homeowners to lower their home insurance premiums. If you have a fairly low risk of filing a claim or you’ve never filed one in the past, discuss with an agent whether this approach makes sense for you.
3 steps to take if you can’t find insurance
If your policy is canceled or nonrenewed, contact your insurer right away. If your insurance company informs you that they’re canceling or nonrenewing your policy, contact them immediately and ask if there are any property upgrades or proactive measures you can take to lower your home’s risk and keep your coverage.
Talk to an independent insurance agent. If you can’t find an available insurer on your own, consider reaching out to an insurance marketplace like Policygenius or a local independent agent who is familiar with the options available where you live. They may be able to set you up with a policy themselves, or at least point you in the right direction so that you’re able to find a company willing to work with you.
Consider surplus lines insurance or other last-resort insurance options. If you’re not able to find home insurance through a traditional insurance provider, surplus lines insurance may be your best bet. Also known as excess and surplus lines insurance, these policies are offered by insurance carriers that specialize in covering high-risk properties considered too risky for the standard insurance market. You also may be eligible for a Fair Access to Insurance Requirements (FAIR) Plan, depending on if your state offers this program. A FAIR Plan is a type of last-resort coverage for homeowners who are denied coverage on the voluntary market.
Methodology
Annual analysis: May 20, 2022 to May 20, 2023
Our annual analysis is based on internal policyholder data for 17,401 active home insurance policies quoted for renewal with Policygenius from May 20, 2022 to May 20, 2023. The average dollar amount and percentage increase for each state reflects the difference between the average original premium and quoted renewal premium. The final renewal premium for each policyholder may differ from the quoted premium due to changes to the insured risk or policy coverages. We limited the analysis to states with a statistically significant number of policies. Average premium percentage changes were rounded to the nearest whole number.
Two-year analysis: May 20, 2021 to May 20, 2023
Our two-year analysis is based on internal policyholder data for 10,283 home insurance policies quoted for renewal with Policygenius from May 20, 2021 to May 20, 2022, and 17,401 policies quoted for renewal from May 20, 2022 to May 20, 2023. Each state’s average premium dollar amount and percentage increase for those two years reflects the difference between the average original premium between May 2021 and May 2022 (before the policyholder was quoted for renewal) and the average quoted renewal premium between May 2022 and May 2023 in that state. The final renewal premium for each policyholder may differ from the quoted premium due to changes to the insured risk or policy coverages. We limited the analysis to states with a statistically significant number of policies. Average premium percentage changes were rounded to the nearest whole number.
Policygenius data quality standards
At Policygenius, it’s important to us that our published content adheres to the highest data quality standards. For this report, we chose to include only states where our sample size was high enough to confidently measure and report premium changes over time. To find a particular state’s required sample size, we conducted a power analysis with permutations (random sampling) of the data that calculates the sample needed based on the variation of values within that state. Five states were ultimately excluded from our report for not having a large enough sample size, and over 2,000 policies were excluded from the analyses because they were statistically insignificant and/or outliers.
About Policygenius
Policygenius, a Zinnia company, is a one-stop insurance platform that makes it easy to compare and buy policies, get unbiased expert advice, and manage an insurance portfolio in one seamless digital experience. Alongside the intuitive enterprise technology solutions and insights offered by parent company Zinnia, an Eldridge business, Policygenius is helping create better end-to-end insurance experiences for shoppers, advisors, and insurers alike — and enabling more people to protect their financial futures along the way.
