What is influencing insurance rates in New Hampshire?

Home and car insurance rates have risen nationally due to inflation, extreme weather events and litigation

The bad news is that home insurance rates have risen nationally by an average 34% between 2018 and 2023. The good news is that the rate of increase in New Hampshire was 17.9%.

Car insurance rates are also climbing — 36% nationwide since January 2020. While rates have been climbing in the Granite State, the average cost here is among the lowest in the country.

But it still begs the question: Why are insurance rates climbing, even in New Hampshire?

Some insight was offered by a Property & Casualty Markets Symposium hosted by the New Hampshire Insurance Department. Inflation, weather events and litigation were the three primary reasons for property insurance increases, according to information offered at the March symposium held in Concord.

Property and casualty insurance includes many forms of coverage, usually associated with homeowners insurance, auto insurance and renters insurance.

Insurance Commissioner D.J. Bettencourt said he convened the symposium “to help us understand what’s going on and to help the consumer understand why they’re experiencing what they’re experiencing.”

“One of the most frequent questions that we get is: Why are my premiums going up? Why am I not able to get access to coverage that I’ve been able to get access to before? And of course, all of that speaks to the dynamics of this interesting market that we’re experiencing right now,” said Bettencourt.

The featured presenter at the symposium was Robert Hartwig. He is a clinical associate professor of finance in the Moore School of Business at the University of South Carolina, and he serves on the Federal Reserve Board’s insurance policy advisory committee.

A frequent presenter on issues related to insurance markets, Hartwig cited inflation as a major source of the increases to policyholders. As costs have risen for insurances those costs are passed on to the consumer, according to Hartwig.

For insurance underwriters, 2023 was the worst year since 2017 and the second worst year since 2011.

“One of the major issues for the industry — and that is really the principal driver in many instances — is the issue of inflation which is still working its way, kind of a pig through a python type of situation,” said Hartwig.

He noted that the Consumer Price Index since the end of the COVID pandemic has risen 19% for consumers, but, for insurers, their costs have increased because of the higher costs (as much as 41%) for plumbers, contractors, laborers and building materials.

“Whereas inflation has subsided in the broader economy, it’s at its peak in the property-casualty insurance industry today at least in terms of passing it through to consumers,” said Hartwig.

For every $100 paid in premiums in 2023, $101 was paid out to cover insured losses, according to Hartwig. “That’s a prescription for a pretty bad year,” he said.

Data from Realtor.com shows that, between 2018 and 2023, the average cost of homeowners insurance in New Hampshire has increased 17.9%. Nationally, the increase was 33.8%, with some of the highest increases in Texas (59.9%), Colorado (57.9%), Arizona (52.9%), Utah (51.9%) and Nebraska (48.6%).

Bankrate says the current average annual premium for homeowners insurance in the state is $973, based on a home valued at $300,000. It notes that many variables contribute to the cost of insurance and that specialized coverage (for flooding, for instance) is a separate cost.

Car insurance rates have climbed 36% since January 2020, according to consumer price data from the U.S. Bureau of Labor Statistics. Within the past year alone, rates for car insurance have soared more than 20%, the data shows.

Bankrate says the average cost of car insurance in the U.S. is $2,311 per year for a full coverage policy, while New Hampshire drivers pay an average of $1,660 annually. CarInsurance.com puts the cost as the eighth lowest in the country.

As with homeowners insurance, the cost of insuring a vehicle in New Hampshire depends on many, many factors, such as age, driving record, where the car is kept, even a driver’s credit rating.

In terms of homeowners insurance, Realtor.com cites climate change–affected weather as a primary reason for increases everywhere.

“Climate risk is a big deal. It can impact home values, insurance costs and the overall stability of a housing market,” said Jiayi Xu, economist at Realtor.com. “The issues are whether you can get access to affordable insurance and how much the costs will increase. In areas with high climate risk and lower home prices, people are tolerating these risks in exchange for more affordable housing.”

In his presentation, Hartwig did not refer to climate change. Rather, he used terms such as “wild weather” and “disaster” to describe an additional reason after inflation for the rise in insurance costs. He also used the term “cats,” insurance shorthand for catastrophic events, such as hurricanes, floods, wildfires, tornados and the like.

“The Northeast is one area where you’ve not had some of the major cats that we’ve seen in some other parts of the country. You’ve had some wild weather, including floods and flooding of vehicles and that can contribute certainly to some of the increases we’ve seen here,” he said.

The U.S. Environmental Protection Agency (EPA) has a ranking of states and counties using what is called the Climate Resilience Screening Index (CRSI). It measures the resilience of U.S. counties and communities to natural disasters.

The national average index is 4.213. New Hampshire comes in with a higher overall resiliency at 9.154. Within New England, Maine (17.971) and Vermont (12.848) are higher, Massachusetts (7.889), Connecticut (3.702) and Rhode Island (3.533) are lower.

The greatest risk for New Hampshire is flooding, related to heavy rain and/or melting snow events and to flooding along the coast as sea level rise continues.

Hartwig talked about the E&S markets. Excess and Surplus (E&S) is a specialty market that offers insurance coverage for risks that standard insurance companies don’t for properties in, say, wildfire zones, high crime areas and along the coast. These E&S market coverages are more expensive because of the nature of the risks involved.

“A lot of this is being generated in places like Florida, California, Texas, Colorado, places like that, and some coastal areas,” said Hartwig. “I don’t think New Hampshire accounts for very much of this, but you may have observed yourself some migration of premiums in New Hampshire to the E&S market.”

Some major insurers are leaving high-risk states. Allstate and State Farm, for example, said in 2022 that they’d stopped writing new policies in California because of the wildfire risk. In April, just weeks before the start of hurricane season, thousands of Floridians lost their ASI-Progressive home insurance coverage.

The New Hampshire Insurance Department says no such incidents of homeowners being dropped by their insurance companies have been reported to it.

As for the E&S market cited by Hartwig, the Insurance Department says it represents less than 1% of total market share in the Granite State. The activity in that market has been largely related to flood insurance, according to the Insurance Department.

The third factor cited by Hartwig was litigation payouts by insurance companies, which he described as “a tax that has to be passed along.”

Hartwig cited a number of reasons for litigation and large awards: “Increasing propensity to sue,” he said, “large jury awards, courts increasingly favoring plaintiffs, general distrust of large corporations that they feel deserve to be punished, third-party litigation funding — you maybe heard you can invest in lawsuits nowadays, aggressive plaintiff bar advertising.”

Another factor in play, as it affects auto rates in New Hampshire, is the greater degree of claims coming from reckless and dangerous driving incidents.

Bettencourt was among a group on June 4 that sought to raise awareness about the dangers of aggressive and reckless driving, driving at excessive speeds, and other hazardous behaviors on New Hampshire’s roadways.

The event was held at the New Hampshire Motor Speedway in Loudon and included representatives from the insurance department, the NH Department of Safety, NH State Police, American Automobile Association of Northern New England, the speedway, the New Hampshire Motorcyclists’ Rights Organization, and the New Hampshire Automobile Dealers Association.

“The connection between reckless driving habits and escalating auto insurance rates is very, very clear. Engaging in speeding or distracted driving not only jeopardizes your own safety, but also endangers the lives of fellow motorists on the road. It is critical for Granite Staters to understand that their choices behind the wheel also affect the availability and affordability of insurance coverage for all drivers. The New Hampshire Insurance Department is hearing a lot from consumers about the rising cost of auto insurance premiums,” Bettencourt said in his remarks.

“Our message today is to emphasize that reckless driving behaviors are not only a safety threat but also put at risk the affordability of auto insurance rates for all motorists. Motorists should be aware that a reckless driving citation, or some other serious motor vehicle violation, will be reflected in your auto insurance premiums for several years,” he added. “This is not going to be a one-time event for you. So please bear those things in mind, not only for your own safety, not only for your own ability to afford your auto insurance coverage, but for all Granite Staters to be able to have access to affordable auto insurance.”