‘It’s a gamble’: Homeowners, experts testify on soaring property insurance

Update: A spokesman for Citizens Property Insurance Corp., Florida's insurer of last resort, provided an update Thursday: policy count now stands at 812,500, down from 1.41 million in October 2023. Since then, 13 new companies have entered the market, and a large number of carriers are requesting rate decreases from the Florida Office of Insurance Regulation.

Diana Hill is paying nearly one month’s worth of Social Security benefits just to insure her Wilmington, N.C. property. She is considering whether to dial back her coverage to save money.

“Admittedly, it is a gamble, but a gamble that a senior on a fixed income must consider,” Hill, 84, told members of the Senate Committee on Environment and Public Works.

Led by the ranking minority member Sen. Sheldon Whitehouse, D-R.I., the committee held a hearing Tuesday titled, “Climate Risk, Crashing Markets: The Insurance Crisis Threatening the U.S. Economy.”

North Carolina suffered heavy damage from Hurricane Florence in September 2018, Hill noted, and Hurricane Helene in 2024. While only a Category 1 hurricane, Florence “dumped more than 30 inches of rain into Wilmington,” Hill said. Helene added further billions in damages.

Insurance companies responded by passing on the costs, Hill claimed.

“It's almost like we're on a pay-as-you-go plan,” she said. “We old timers paid when there was very little threat to insurance companies' bottom line, and now we're paying even more. Many of us seniors, if not hurting … are struggling to keep up with the cost of protecting our homes.”

Many insurance companies are no longer offering insurance in many high-risk areas of Florida and California. Or they are offering bare-bones policies that do not cover much.

State Farm rate hike

Also Tuesday, California Insurance Commissioner Ricardo Lara approved a 17% emergency rate hike for State Farm. The state’s largest insurer made the request following January wildfires that roared through two Los Angeles County communities.

State Farm’s rate hike could total $749 million, said Carmen Balber, executive director of Consumer Watchdog.

The insurance issue is a climate change issue, Whitehouse said. A board member for “the largest insurance company on the planet,” presumably Allianz SE, “said that he just does not see a way for the insurance business model to survive without meaningfully addressing climate change,” Whitehouse said.

“And when that insurance model collapses, it cascades into real estate and then cascades into the general economy.”

Whitehouse blasted colleagues on the Republican side for accepting gas and oil special interest support over climate change solutions. No Republican senators participated in the hearing.

Prior to the hearing, Whitehouse sent a letter demanding that Environmental Protection Agency Administrator Lee Zeldin halt plans to dismantle landmark federal climate programs.

Philip Mulder is an assistant professor in the Risk and Insurance Department at the Wisconsin School of Business at the University of Wisconsin. He shared his research on the homeowner’s insurance market.

“I will be direct. Homeowners insurance is becoming more expensive, even as it becomes harder to find a reliable policy,” Mulder said.

From a data set of homeowners insurance premiums from 84 million mortgage escrow payments, Mulder found that the average homeowner’s premium increased by 48% between 2020 and 2024. Increases in the cost of building materials and labor, along with other rising costs, accounts for some of the premium hikes.

“However, our research also shows an unmistakable connection between disaster risk and rising premiums,” Mulder explained. “While inflation-adjusted premiums only increased by 20% in relatively low-risk areas, they increased by more than 40% in the zip codes that are most exposed to wildfires and hurricanes.”

Data collected by the Senate Budget Committee shows rising insurance non-renewal rates, Mulder pointed out. From 2020 to 2023, the rate of policyholders dropped by their insurer doubled from a half-percent to 1% per year, representing an additional 423,000 policyholders who lost their coverage.

'Raising rates and narrowing coverage'

It’s not just Florida and California feeling the impacts of climate change, Mulder said. According to University of Wisconsin data, the cost of homeowners insurance in Oklahoma is up by more than 50% in the last five years and by more than 80% in Colorado.

First Street, a New York City-based research firm, suggests that property insurance is going to increase 300% to 400% over the life of a mortgage, Whitehouse noted.

The insurance increases are a serious threat to the market balance between mortgage affordability, property demand, and values, the senator said.

“Miami Dade County is at $17,000 on average,” Whitehouse said. “If you triple that or quadruple that, you can see how a carrying cost of, say, $50,000 a year to pay for property insurance is going to knock down the value of the property dramatically. You're not just signing up for that property when you buy it, you're signing up for that $50,000 a year expense.”

Josh Levy, mayor of Hollywood, Fla., joined the hearing via video from his office. Windstorm property insurance in Hollywood is up more than double in five years, he said.

The Florida situation is not improving, Levy said, with many homeowners forced into the state’s insurer of last resort, Citizens Property Insurance Corp. Citizens is carrying over one million policies and is “raising rates and narrowing coverage.”

Gov. Ron DeSantis and the Republican legislature tout a series of property insurance reforms enacted in 2022 and 2023, which aimed to stabilize the insurance market, reduce claims-related litigation, and increase competition.

Insurance Commissioner Michael Yaworsky issues regular news releases on insurers returning to the Florida market. But Levy painted a different picture of the market.

“The measures that they put in place have not yet yielded any real or broad-based rate relief whatsoever,” he said. “In the state of Florida, the market remains unstable.”

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.