Homeowners Insurance Less Affordable for Consumers Over Last 20 Years, According to New IRC Study
09 Mayo 2024 - 11:30AM
Business Wire
Homeowners insurance affordability has deteriorated over the
last two decades, driven by frequency and severity of natural
disasters, economic conditions, rising construction costs and
litigation, according to a new Homeowners Insurance Affordability
report by the Insurance Research Council (IRC), a division of The
Institutes.
On average, homeowners spent 1.54% of their household income
toward insurance in the 2000s; that rose to an average of 1.99% in
the 2010s. In 2021, the latest year for which expenditure data is
available, spending on homeowners insurance was 1.99% of household
income.
The U.S. average expenditure on homeowners insurance increased
from $508 in 2001 to $1,411 in 2021, a 5.0% annualized rise. In
comparison, U.S. average household income increased more
moderately, with an annualized growth rate of 2.5% from 2001 to
2021.
IRC’s analysis looks at homeowners insurance affordability at
the countrywide and state level and examines underlying cost
drivers by state. It does not address affordability for specific
demographic or geographic risk profiles. The IRC noted that
individual premiums can vary significantly, depending on several
factors, including home location, its value, coverage options,
previous claims history, and insurance company. While the most
recent expenditure data is available only through 2021 and does not
reflect the newest increases in personal insurance rates, it
nevertheless provides an insightful analysis of trends in homeowner
insurance affordability.
Key findings:
- The most affordable state in the country is Utah, with
consumers spending 0.96% of their income on homeowners insurance,
compared with Florida as the least affordable, with consumers
spending 4.07%. Looking at rankings over the past five years,
Florida and Louisiana have consistently maintained their positions
as the least affordable states.
- The impact of underlying cost drivers varies widely by state.
Exposure to significant weather events differs significantly and
plays an important role in the cost of insurance. Non-weather
events, claiming behavior, and the litigation environment also
affect overall affordability.
“An understanding of what drives the cost of insurance is
essential for consumers navigating the current insurance market,”
said Dale Porfilio, FCAS, MAAA, president of the IRC. “Efforts to
promote homeowner awareness and adoption of protective measures,
strengthen state and local building codes, and encourage community
resilience programs can all improve insurance affordability.”
Porfilio, who is also chief insurance officer at the Insurance
Information Institute (Triple-I), noted that the IRC’s
Affordability Index can be used to compare the affordability of
homeowners insurance in different states.
“Homeowners insurance in the U.S. is regulated at the state
level, so these comparisons and underlying cost drivers can provide
legislators and policymakers with valuable information to help them
improve affordability in their states,” Porfilio said.
About Insurance Research Council
The Insurance Research Council (IRC), affiliated with The
Institutes, is an independent, nonprofit research organization
supported by leading property and casualty insurance companies and
associations. IRC provides timely and reliable research to all
parties involved in public policy issues affecting insurance
companies and their customers. IRC does not lobby or advocate
legislative positions.
About The Institutes | Risk and Insurance Knowledge
Group
The Institutes, a leading provider of risk management and
insurance knowledge solutions, offer innovative education,
research, networking, and career resources, including professional
designations such as the CPCU® program, leadership programs,
continuing education courses, events and conferences, associations,
custom solutions, publications, and assessment tools.
CPCU is a registered trademark of The Institutes. All rights
reserved.
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