Home insurance premiums have risen by as much as $865 this year for homeowners who originally purchased their policies in 2021. In response, the mortgage industry and federal regulators are aiming to determine the best courses of action to mitigate the financial burdens on both homeowners and insurance carriers.

This is according to a new report published by Matic, which aims to assess the impacts of these realities on a highly volatile home insurance market.

“The combination of climate change, regulatory challenges, and inflation has created a perfect storm, leaving many homeowners without the coverage they need,” Ben Madick, CEO and co-founder of Matic, said in a statement. “American homes are increasingly underinsured, highlighting the need for the insurance industry and regulators to collaborate on solutions.”

In 2023, Matic describes a “surge in carrier restrictions and withdrawals from certain markets,” which combined with the impacts of climate-induced natural disasters and inflationary-driven cost increase for builders. This led insurance carriers to raise their prices or risk becoming unprofitable.

As carriers raised rates, they became increasingly challenged by “denials and delays from the state Department of Insurance (DOI), which must approve any premium increases,” the report explained. “Faced with these regulatory challenges and the inability to cover costs, many carriers began to limit or stop writing new policies, especially in high-risk areas.”

As a result, many homeowners were left unable to secure home insurance coverage, with recent data indicating that as many as 6 million homeowners lack coverage in 2024.

Premium increases have affected different types of coverage, particularly based on the risk in a given area. “Dwelling coverage” saw sharp spikes in costs between 2021 and 2022 before moderating somewhat in 2023, but premiums renewed in 2024 rose by $445 when compared to policies purchased in 2021.

Based on Matic data, “premiums for new policies surged by 17.4% in the first half of 2024 compared to 11.6% in 2023 and 5.9% in 2022. Additionally, “renewal premiums have risen even more dramatically; the average homeowner who bought a policy in 2021 is now paying a staggering 69% or $865 more in 2024 than when they initially purchased their policy.”

Lawmakers have taken notice in dedicated congressional hearings and in policy statements, particularly as voters express concerns about housing ahead of this fall’s general election. From presidential to congressional candidates, housing has become an important issue for the electorate. The government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac have also taken notice, enacting new climate policies and inquiries to assess the impact of the market dynamics.

And the mortgage industry is also feeling the brunt of these challenges, Madick said.

“Changing market dynamics are not only affecting homeowners but also continue to put significant strain on the mortgage industry,” he said. “Mortgage entities should be aware of the latest trends, as rising premiums are increasingly determining if and when a loan is approved. Working with an insurance marketplace like Matic can help offset some of the increased costs we’re seeing.”

Related