"Homeowners insurance bill of rights" provides clarity, fairness, Consumer Reports says

More than half of homeowners say their insurance premiums went up in the last year, according to a large survey from the nonprofit consumer advocacy and journalism organization Consumer Reports. Costs for rebuilding and climate change are among the reasons.

Consumer Reports has drawn up what it calls a "Homeowners Insurance Bill of Rights," which it hopes will be adopted by states around the country.

Sara Enright is the senior director of safety and sustainability at Consumer Reports. Enright recently joined "Marketplace Morning Report" host David Brancaccio to discuss what impact such a bill of rights could have for consumers. The following is an edited transcript of their conversation.

David Brancaccio: So you surveyed tens of thousands of people. When you collated what you heard, the word you're using is not just "crisis," but "full-blown crisis." It's a crisis because of what, Sarah?

Sara Enright: Home insurance rates have been skyrocketing across the country, particularly in areas facing extreme weather events, and we've heard just a flood of stories and frustration coming in from consumers around the country, suggesting that rates are rising to an extent that's unaffordable.

Brancaccio: Right, and it's not that insurance companies are — across the board — making this up. I mean, their costs are certainly going up. When they pass them along to consumers, it almost seems understandable.

Enright: That's right. There's a lot of different reasons for the rising cost of insurance, right? Construction costs are going up. They've gone up 40% over the past couple of years since the pandemic. Inflation has had its cut. Extreme weather events are increasingly common and increasingly severe across the country and happening in locations that weren't expected for extreme weather events; they don't have proper coverage. So there's a lot of different factors here. You know, this is not a story where insurance companies are entirely the bad guy.

Brancaccio: Now, insurance companies can't single-handedly stop the progress of climate change. They could have a strong voice in policies to mitigate climate change, but there are things they can do to make life easier for their customers. For instance, you, Consumer Reports, want in your bill of rights, clearer language in policies. I've seen fire insurance policies for homes and fire-ravaged Altadena, California, that say really clearly they'll pay you this number if the house burns down and is a total loss. Then, when the house burns down, the company said, "Oh, but we depreciate that number so you don't get what we said." You can imagine that some clarity might improve customer understanding of what they're buying.

Enright: Indeed. We want to ask, in this time of crisis, for insurers to step up to provide greater fairness, transparency, and accountability to their paying consumers. The first right in the homeowner's insurance bill of rights is that we'd like to see insurers clearly explain in plain English what's covered in a policy and what is not. One of the things we found through our research is that many homeowners are not aware that the majority of policies don't cover major weather events like floods, and that leaves a lot of people vulnerable.

Brancaccio: How does your bill of rights, how would it get into rules for insurance?

Enright: We'd like to see the insurers voluntarily step up to adopt the Bill of Rights. And, at the same time, we are talking to state regulators who, frankly, are hungry for solutions to help reduce the pain of rising costs in their state. So we wanted to give them a comprehensive roadmap of options that they could deploy in their state to better reflect the needs of consumers in their region.