Spike in homeowners insurance rates has Nebraska insurers feeling 'challenged'

The surge in local housing prices has been compounded by a dramatic increase in homeowners insurance, an online data research center has determined.

Insuring a house in Nebraska is twice as expensive as the national average, according to Insurify.

"Nebraska is pretty exemplary of the region," said Chase Gardner, Insurify's head of data research. "The typical U.S. homeowners are going to pay something like $1,800 for an insurance policy and residents in Nebraska are paying over $3,500 on average."

The situation has many local insurance officials searching for answers.

"I've been in this industry for 33 years and I have never seen it as challenged as it is right now," said Mark Walz, chairman, president and CEO of Lincoln-based Farmers Mutual of Nebraska.

The company has lost money in back-to-back years after paying out more than $1 billion in total loss claims in 2022 and 2023.

Walz cited an industry report by ratings agency AM Best, which released its most recent market segment report this week.

AM Best listed weather, reinsurance behaviors and the rising cost for repairs — caused by inflation — as the reasons for the spike in homeowner insurance rates nationwide — and more specifically, in Nebraska.

"In addition to these headwinds, lingering challenges such as litigation financing and social inflation have yet to be resolved," the report stated. "Insurers also faced persistent inflationary pressures and were in dire need of rate relief to offset elevated loss costs, supply chain disruptions, and rising commodity and labor costs."

According to the American Agents Alliance, a trade organization for independent insurance agents and brokers, the cost of labor and construction materials has increased nearly 50% since 2020.

The rising cost to replace roofs and other damage caused by hail storms only adds to the reasons for Nebraska's high home insurance rates.

"To put a new roof on today compared to a new roof 10 years ago has dramatically increased," said Paul Johnson, a State Farm agent in Lincoln. "That's the No. 1 claim in Nebraska."

Roofing Gnome, an online site, recently came up with its list of the most at-risk counties in the Midwest for hail damage for 2024 and determined that Douglas County and Webster County, located south of Grand Island, were Nos. 7 and 8, while Furnas (10), Polk (13), Dawson (14), York (17) and Clay (19) were all in the top 20.

Lancaster County was 286th on the list that ranked 600 counties.

In short, Nebraska homeowners continue paying for the threat of risky weather events — from hail and tornadoes to blizzards and drought — Gardner said.

And because Nebraska doesn't have the population base of a place like California, which annually deals with wildfires, mudslides and an occasional damaging earthquake, its homeowners pay more.

"Other than Lincoln and Omaha, it's kind of hard to spread the risk in Nebraska, because it's just a small population state," Johnson said. "To have to spend the money to do all the repairs is hard because you can't spread the risk like you can in a bigger state."

Neighboring states like Iowa and Kansas have populations at or near 3 million — about 50% more than Nebraska — which enable them to better spread the risk.

That could explain the reason Nebraska's homeowners insurance rates increased 322% more than income in the state in 2023, while its insurance costs are 99% higher than the U.S. average after rates spiked by 14% in 2023, Insurify reported.

"A lot of states in the central region of the country have pretty high home insurance rates, Nebraska included," Gardner said. "What we hear and what we see in the data is essentially just that severe weather risk plays a huge part in (the spike in premiums)."