As Arizonans, we’ve all felt the sting of rising insurance premiums in recent years, whether it’s our homeowner policies or auto coverage. The numbers are startling. Since 2019, homeowner premiums in our state have surged by over 60%, while nationwide auto insurance rates have climbed more than 40%. In metro Phoenix alone, the average household shells out about $2,770 annually for car insurance, a hefty $226 more than the national average. These increases are not just statistics – they hit our wallets hard and demand a closer examination of their causes.

Prominent Democrats, including those in the White House and on Capitol Hill, have voiced concerns about the role of insurers in these significant price increases. However, this is a complex issue with various contributing factors. Let’s look beyond the political discourse and examine the economic realities that underpin these rising costs.

First and foremost, our country is grappling with inflation at 40-year highs, and Arizona is no exception. This inflationary pressure inevitably impacts everything, including the cost of building materials and labor needed for home repairs. Unsurprisingly, homeowner insurance rates have been forced upward. Insurers are paying out more due to increased building values and the rising costs of repairs in the wake of natural disasters like storms and wildfires.

Consider this: in 2023, insurers paid out nearly $104 for every $100 collected in homeowner premiums. This imbalance reflects their mounting expenses in settling claims amidst more frequent and severe natural disasters. Construction labor costs have surged by nearly 25%, and building materials have seen a 37% increase since 2020, compounding the financial pressure on insurers and, consequently, on homeowners.

Additionally, increasing homeowner insurance costs have been fueled by costly federal government intervention. Federal flood insurance, intended to protect homeowners from financial ruin, has inadvertently promoted development and habitation in flood-prone areas. Subsidized insurance rates have made living in these high-risk zones more affordable and attractive, leading to higher population density and property values. As a result, when floods occur, the potential for damage and claims rises, driving up the overall cost of the program. This creates a cycle of escalating expenses for both the government and policyholders.

The story is much the same for auto insurance. The escalating costs of motor vehicle repairs — up more than 35% since 2019 — drive up premiums as insurers grapple with higher expenses for parts and labor. Nationwide auto theft rates have also skyrocketed, with over 1 million vehicles stolen in 2023 alone — including 20,255 in Arizona. This crime wave adds to insurers’ losses, pushing auto claim expenses beyond what premiums can cover.

Yet another significant factor contributing to the rise in insurance costs is litigation abuse. Plaintiff firms are increasingly suing insurers for inflated damages, contributing $4 billion to commercial auto insurance claim costs in 2021 alone. This wave of litigation further strains insurers’ financial stability and drives premiums higher for all policyholders. 

Instead of acknowledging these economic realities, Democrats have chosen to blame climate change and corporate greed. Even more concerning, they are seizing on this crisis to do what they always do — advocate for big government intervention. Led by Senator Elizabeth Warren, Democrats on Capitol Hill are moving to expand federal control over insurers, akin to what was done with health insurers under Obamacare. Just last month, Warren and other Democratic lawmakers penned a letter urging the Federal Insurance Office to subpoena data from insurers, ostensibly to monitor regulatory gaps. This action definitively raises concerns about potentially granting Washington sweeping powers to regulate insurance rates. This step could lead to even higher costs and reduced choice for consumers, particularly in underserved communities.

We cannot afford to let far-left policies dictate our insurance market’s future, potentially mandating a national insurer of last resort and federal rate regulation. Such measures could leave us footing the bill for lavish mansions in fire and mudslide-prone Santa Barbara rather than addressing the pressing needs of everyday Arizonans struggling with their insurance bills.

Instead of politicizing the issue, we need pragmatic solutions that address the root causes of rising insurance costs. This includes tackling inflation through sensible economic policies, curbing litigation abuse, and fostering competition in the insurance marketplace. Arizonans deserve affordable, accessible insurance that reflects the realities of our state and its economic challenges.

It’s time to focus on real solutions, not political grandstanding. Let’s work together to ensure that our insurance markets remain competitive, responsive to consumer needs, and insulated from undue government interference. Our wallets — and our future — depend on it.

J.D. Hayworth represented Arizona in the U.S. House of Representatives from 1995 until 2007, and  is owner of The Great 48th Group LLC, a communications and public policy consultancy..