As homeowners in Vero Beach, Florida, Marie and Jack Zuzak have had their share of insurance problems. She is a retired urban planner; he worked in the field of biotechnology research. They own an older home that is more vulnerable to hurricanes than modern buildings, and two years ago, after being turned down several times by different insurers and struggling to find an affordable plan, they finally gave up and went without the standard home owners insurance.
“We just felt that for the value of the house, it wasn’t worth the premiums,” Marie Zuzak said.
This is Florida, where coastal living is becoming increasingly difficult to insure. But the Zuzaks also own a house in Colorado, where they spend their summers in the upper foothills near Boulder.
“We were dropped last year by our insurance company, along with a lot of other people,” she said. “They just left the area.”
This is becoming an increasingly common story in many parts of the country. Digital insurance agency Matic said premiums for new policies rose by an average of more than 8.5% last year and by 24% for renewals, and are likely to continue rising this year. Availability also declined, particularly in certain regions, said Andy Hellard, vice president of products at the company.
“What you’re seeing along the Gulf Coast, coastal Texas, large parts of California, parts of the Mountain West that are exposed to wildfires, it’s really a problem not only of pricing, but of availability, where you just can’t get coverage many times,” Hellard said. “And many times the coverage available is much, much higher.”
Amy Bach has been helping people deal with insurance issues in California, Louisiana and Florida for years as the executive director of United Policyholders, an advocacy group for insurance customers.
“What’s really new is that this is impacting people in Arizona, Oklahoma and New York, and it really feels like a national issue,” Bach said.
The main reason, of course, is climate change, which has increased the frequency and severity of droughts, wildfires and extreme weather in many areas. Last year, the U.S. suffered a record 28 climate- and weather-related disasters that caused at least $1 billion in damage, according to the National Oceanic and Atmospheric Administration. Insurance companies are raising premiums or even pulling out of some markets, Bach said, to protect their bottom line.
“Increasingly severe and frequent weather disasters will remain due to climate change,” she said. “So they’re projecting that their losses will continue to grow.”
Reinsurance companies, which provide insurance to insurance companies, also raised their prices. Meanwhile, advanced climate modeling, drone footage and other technologies have also given insurers more detailed information about risk.
“Whereas in the past they insured properties much more blindly,” Bach said, now insurers can see that a homeowner has a trampoline in the yard or the house is surrounded by trees. “These images they’re buying now annoy them.”
Then there is inflation. Higher labor and material costs make it more expensive to repair and replace damaged homes. Between 2019 and 2022, replacement costs have jumped 55%, according to Mark Friedlander of the Insurance Information Institute, an industry-funded research and education group.
“That’s almost four times the cumulative US inflation rate over the same period, which is about 15% overall,” he said. “It’s obviously a factor in determining insurance premiums.”
Friedlander said premiums are likely to increase by double-digit percentages again this year after the property/casualty insurance industry lost $38 billion in underwriting last year.
It’s also affecting home sales, said Dane Taylorson, senior loan consultant at Savi Home Loans in Towson, Maryland. Mortgage lenders require homeowners to purchase title insurance, but won’t lend if the buyer’s debt-to-income ratio is too high. Insurance premiums are usually folded into a homeowner’s monthly mortgage payment. High mortgage rates are already pushing many buyers close to the limit, Taylorson said.
“If the insurance goes up and we’re already close, that could keep that person from getting that home,” he said.
Taylorson said this happens to about 15% to 20% of customers. He can usually find them a more affordable policy to lower their monthly payment, but with less coverage or higher deductibles.
In Colorado, after several months of calling insurance companies and brokers and talking to neighbors, Marie Zuzak finally found a less comprehensive policy for $4,000 a year. The couple just received a renewal notice raising the cost to $6,000 a year.
“It’s a big increase,” she said. “We feel like we’re just grateful to have some coverage.”
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