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What’s behind recent rising home insurance rates

Google reports that searches for “how much is home insurance” reached an all-time high in the U.S. this year— but what’s causing insurance rates to rise in Arkansas?

LITTLE ROCK, Ark. — If you own a home, you’ve likely seen your insurance rate rise— and you’re not alone.

It’s been the case as more natural disasters take a toll on communities, including the tornado that hit central Arkansas back in March.

This year, Google reported that searches for “how much is home insurance” reached an all-time high in the U.S. 

For Sara Thorpe and her family here in Arkansas, what’s happening in the housing market has been top of mind. 

“Everything is more expensive in the last few years, for sure. But insurance definitely has gone up, which caused us to shop around,” Thorpe said.  “We text our agent a lot. We have lots of questions about different things”

Trends show that home insurance prices will likely continue to increase— but why?

Scott Holeman, a spokesperson for the Insurance Information Institute, or Triple-I, explained that there are a lot of factors happening simultaneously.

“A rise in cost for building materials, appliances, labor, and then those rising insured losses from extreme weather. And again, more people are moving into harm’s way,” Holeman described. 

Holeman added that although Triple-I is funded by the insurance industry, their mission is to help people better understand insurance, especially with natural disasters being one of the driving factors to these increases.

“It’s not just in California and Florida, where we always hear about hurricanes and wildfires. There in Arkansas and Mississippi, you guys were hit by major tornadoes in the first half of 2023. And the fact is that since the start of last year, double-digit rate increases have been approved by 31 state insurance departments according to an analysis by S&P Global,” Holeman said.  

According to Holeman, we’ve also seen some insurance companies deciding to just opt out of where and what they’ll insure. 

“In four of the last five years, home insurance coverage has been unprofitable for insurance companies. That’s just not sustainable in the long run, for businesses to operate at a loss,” Holeman said. “Many insurers are still in the red, despite some sharp increases to those premiums.”

However, many of these companies have reserved monies, which might help them get by, but Holeman explained that “they are required by regulators to keep so much on reserve in case of natural disasters.”

“I mean, insurance is a promise to pay, right? And so it’s a highly regulated industry, and the companies have to keep so much in reserve. So that in case there is a disaster, there’s money there to pay those claims,” he added.

While this is the case, Holeman said that it’s imperative to take what he calls preemptive measures, which can include:

  • Stay on top of maintenance of your home
  • Make sure your home is fully covered
  • Check that the insurance you have is affordable

“That’s one thing that we try to do is stay on top of the maintenance, regular maintenance of our home. But, also making sure that we have full coverage on our house, because if we didn’t have full coverage on rebuilding our home, in the case of a tornado, that would have been more money than what we would have been able to have to rebuild our home and get it back to where we could live here,” Thorpe said. 

However, she added that’s the story for a lot of people— they didn’t have insurance that covered them being able to rebuild their homes.

“And it’s just, it’s really sad. So I think it’s super, super important that you have enough coverage on your house to be able to rebuild it if a disaster were to happen,” Thorpe said.

Holeman pointed out that on the positive side, there are still a lot of companies that want your business, and he encourages people to shop around and compare rates. He explained that competition is what helps bring prices down.

At the same time, there’s one thing he strongly discourages doing.

“Sadly right now, with rates going up, some people if their homes paid for, they’re deciding not to have coverage, and that’s just, that’s a horrible thing to do,” Holeman said. 

For homeowners like Thorpe, she believes that education is key. 

“I feel like there’s not a ton of education as we grow up, like about these types of things. Oh, when you grow up, you’re gonna own a house and you need insurance. And I think those are things that we figure out sometimes too late, and we look back and realize, oh, we probably should have taken that more seriously, but you don’t think about that until something tragic happens,” Thorpe said. 

At the end of the day, Holeman said that the hard reality is unless things change, don’t expect insurance rates to go down soon.

“So I think for the next few years, we probably shouldn’t be surprised if there are some increases. We’ve also seen the trend of catastrophes continue. So until that changes, we’re probably not likely to see major downward trends in pricing,” Holeman added.

Here are the yearly statistics:

  • About one in 20 insured homes has a claim.
  • About one in 35 insured homes has a property damage claim related to wind or hail.
  • About one in 60 insured homes has a property damage claim caused by water damage or freezing.
  • About one in 385 insured homes has a property damage claim related to fire and lightning.
  • About one in 625 insured homes has a property damage claim due to theft
  • About one in 1,670 homeowners policies has a liability claim related to the cost of lawsuits for bodily injury or property damage that the policyholder or family members cause to others

“The fact is, we all need to be risk managers. In today’s world, there’s a collective responsibility for everyone, whether it’s communities, consumers, policymakers, and industries to improve how and where we’re living. The fact is, more and more people are living in harm’s way. And it’s it’s imperative that we shift from detecting and repairing to predicting and preventing that loss,” said Holeman.

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