Insurance Research Council: US homeowners insurance becoming 'increasingly unaffordable'

By David Bull

June 13 - (The Insurer) - The proportion of household income U.S. households spend on homeowners insurance is projected to have doubled from 1.19% in 2001 to 2.4% in 2024, said the Insurance Research Council (IRC) in a report.

The report, Homeowners Insurance Affordability: Countrywide Trends and State Comparisons, found that insurance expenditures have consistently outpaced income growth, with affordability reaching its lowest point last year.

The IRC, which is an affiliate of The Institutes, said that its affordability index, which compares average homeowners insurance costs to median household income, reported that U.S. households spent 2.09% of income on insurance in 2022, up from 1.19% in 2001, a figure projected to increase to 2.4% based on 2024 data.

“This steady upward trajectory signals ongoing challenges in the insurance market. From natural disasters and legal system abuse to escalating repair costs and fraud, the pressures on insurance costs are significant, and they are driving premiums higher for consumers,” said IRC president Dale Porfilio.

Porfilio is also chief insurance officer at the Insurance Information Institute.

By geography, the report found that Louisiana, Florida, Mississippi, Oklahoma and Arkansas were the least affordable states for homeowners insurance, while Utah, Oregon and Alaska were the most affordable, based on 2022 data.

It noted that Florida showed improvement compared to 2021, even before the legislative reforms enacted in the Sunshine State in 2022 and 2023 have been full captured in the data. The changes have led to fewer property claim lawsuits and increased private insurer participation.

The report said that affordability is shaped by a range of cost factors across different states, including the frequency and severity of cat and non-catastrophe claims, legal and fraud-related costs, and exposure to natural hazards like hurricanes, wildfires and hailstorms.

Porfilio said: “Understanding what’s driving insurance costs at the state level can help leaders make informed decisions to protect consumers and ensure continued access to essential coverage.”