Housing industry groups are fighting the surge in homeowners insurance costs

Affordability is hampered by insurance

In addition to consumers, housing industry players are also feeling the strain caused by rising premiums. 

“Affordability is already a challenge for homeowners and insurance is just another catalyst making it more difficult for a lot of consumers to continue making their payments,” Toby Wells, the president of Cornerstone Servicing, said.

He adds that this, in turn, drives up costs for servicers as they need to provide these consumers with loss mitigation efforts. Additionally, Wells said servicers have to be mindful of service fees because they don’t want to exacerbate the affordability issues.

These challenges led Wells, along with professionals across the housing industry to reach out to their trade associations to see what they could do to help improve the situation for both themselves and their clients. Since homeowners insurance is regulated at the state level, this is where the brunt of the homeowners insurance-focused advocacy activity has occurred. So far, in California and Florida, two states plagued by insurance issues, these efforts have been met with meaningful change. 

Insurance in the Golden State

Susan Milazzo, the CEO of the California Mortgage Bankers Association (CMBA), said her group’s efforts to ameliorate its state’s insurance issues began back in 2023. Although California’s insurance issues seem to have hit their zenith in recent years, the root of these challenges dates back to 1988, when the state passed Proposition 103. 

“It put limitations on a carrier’s ability to be approved for rate increases,” Milazzo said of the law. “So, what happened over time, with this regulatory issue and with the state being prone to natural disasters like wildfires, is that it became impossible for the carriers to continue to provide coverage based on their inability to reset their premiums at a level that would cover the risk that they’re assuming.” 

Additionally, if a carrier did request a rate increase, Milazzo said the requests were frequently held up by the Department of Insurance.

“We started making appeals to the Department of Insurance commissioner saying that something needs to be done — we were at a crisis point,” Milazzo said. “People were being denied homeownership, not because they couldn’t qualify for a mortgage, but because when they got to the point where they found out how much their insurance would be, sometimes it would cost more than their monthly mortgage payment, and deals were falling through.”

In order to amplify their message, the CMBA and other state trade associations, embarked on a PR campaign, which saw them publish op-eds and share their message across a variety of media channels.

The result of these efforts was the state DOI creating the “Sustainable Insurance Strategy,” which, among other things, allows carriers to use catastrophic rate modeling, meaning that the carriers are allowed to set their rates based on their predictions of catastrophe or natural disasters, and it streamlines the process for approval for a rate increase.

According to Milazzo, many of the carriers that have left the state or have stopped writing new policies have promised that, as long as the strategy continues to be implemented, they will return to the Golden State. While this is good news, Milazzo said the progress is not coming without roadblocks, including consumer groups who do not want insurance rate increases, so they are pushing back against the implementation of the strategy. 

“We are trying to use any opportunity we can to support the DOI’s efforts to move forward and hopefully give the insurance market the stability it needs,” she said.

Changes in the Sunshine State

In Florida has been hampered by similar challenges, including carriers leaving the state, as well as many others going insolvent. The state’s Realtor association has helped spearhead much of the efforts focused on improving the situation for consumers in the state. 

While the rising cost of the natural disasters hitting the state was certainly a factor in so many carriers choosing to leave the state or go insolvent, many insurance experts also fault the state’s laws surrounding insurance claim lawsuits, which they felt led to thousands of frivolous lawsuits. 

As the situation in the state worsened, Trey Goldman, the senior vice president of public policy at Florida Realtors, said he and his association decided to take action. 

“Recognizing our decision and participation would help determine whether Florida would continue to have a private insurance market, Florida Realtors ultimately passed motions to 1) support legislation repealing one-way attorney fees and assignment of benefits – the then-largest cost driver of unsustainable property insurance rate increases, and 2) ensure statutory consumer protections are retained, enhanced and enforced on behalf of policyholders. We then lobbied the legislature accordingly,” Goldman wrote in an email.

In the three years since these motions were passed encouraging state lawmakers to take action, Goldman said there has been meaningful change in the state’s insurance market. 

“Florida’s insurance market has dramatically improved, with 15 new private property insurers offering coverage. Are we still the No. 1 hurricane risk in the world? Yes, but since enacting the above reforms, we’ve become attractive to private insurance capital,” he wrote. “To be sure, work remains, including efforts to make buildings and infrastructure more resilient, and we remain committed to making this a reality.”

Although all of these changes are welcome, insurance industry professionals are still hoping for more. 

“Many states are taking the right steps to align with constituents in the state to make positive change, but they also need to keep an open mind and consider how those measures will impact the insurance carriers who are currently participating in the state,” said Sean Kent, the senior vice president of insurance at FirstService Financial/FS Insurance Brokers.

“I think a true win-win outcome where consumers get super-low rates and carriers get the rates they want to have a stable business is far-fetched, but there has been movement over the past couple of years, and we are starting to see certain legislation in some states gain momentum. I think we will probably see some positive change in the near future.”