Home insurance premiums could soon stabilize

Home insurance premiums continue to rise, but the severity of the increases have cooled in recent months, which suggests that a semblance of stability is returning to the market. But this doesn’t negate the reality of other turbulent risk factors — including extreme weather events stemming from climate change or potential regulatory challenges.

This comes from an analysis conducted by Matic that was sourced through data from more than 36 million requests for quotes, according to the company.

“In 2024, many homeowners faced challenges finding coverage as insurers tightened underwriting criteria or withdrew from high-risk regions,” the analysis stated. “After years of financial strain, most major carriers achieved profitability by mid-2024, driven by long-overdue rate increases approved by state regulators to offset rising claims costs.”

Moderating inflation also assisted this trend by reducing home repair expenses and lowering costs for building materials. Profitability metrics for insurers showed improvement compared to 2023, but premiums this year also included sharp increases that strained the budgets of families and businesses.

“To illustrate, the average homeowner who bought their policy in 2021 was paying nearly 69% more three years later at their 2024 renewal, or an extra $865 annually,” the report said. “As of November, however, rate growth showed signs of tapering; the average increase for new policies dropped from 10.7% in the first half of the year to 6.6% in the second half, indicating early signs of stabilization.”

Much was made of insurers’ decisions to pull back from states with more risk of extreme weather, but this trend has also cooled. These companies have started to reenter states they had previously fled.

“By November, major national carriers like Safeco, Travelers and Nationwide had reopened in multiple states, increasing the average quotes available per person by 60% from the year’s low point in March,” the report said. “In addition, the Excess and Surplus (E&S) market is stepping up to fill coverage gaps in high-risk areas, offering homeowners alternative options where traditional carriers remain limited.”

But the impacts of extreme weather are not going away, with a recent report estimating the global cost of weather events over the past decade at $2 trillion. Disasters including hurricanes Helene and Milton will need to be dealt with for years to come, and flood risk has increased in recent years in places where it hadn’t previously been an issue.

A lack of housing affordability also plays a role in the posture of the insurance market, since excessive insurance premiums compound affordability challenges faced by households.

“Overall, 2025 could bring a more balanced home insurance market if inflation remains in check and severe weather events are limited,” the report said. “Profitability has returned, and there are signs of market stability, yet risks remain. Severe weather in high-risk states and regulatory constraints will continue to shape the market, potentially driving new premium increases if significant climate events occur.”

Related