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Home, Auto Insurance Costs Soar

The price of home and auto insurance is skyrocketing for consumers, as insurers seek to offset costly weather events of recent years, The Wall Street Journal (subscription) reports.

What’s going on: “For many Americans, getting insurance for both their cars and homes has gone from a routine, generally manageable expense to a do-or-die ordeal that can strain household budgets.”

  • The natural disasters of the past decade have “been the costliest ever” for insurance companies. Warmer temperatures have exacerbated storms and contributed to wildfires.
  • Regulators in states including California, New Jersey and New York have recently approved significant auto and home insurance rate increases.

Why it’s important: “Homeowners and drivers are facing sharply rising premiums, less coverage and fewer, if any, choices of insurer. In some places, the only options are bare bones coverage or none at all. That can make homes worth less and harder to sell, and cars less affordable.”

  • One company increased its rates by more than 23% last year for tens of thousands of policy holders in Texas and Illinois, while another refused to renew more than 10,000 policies in hurricane-prone parts of North Carolina.

Big losses, bigger increases: Insurers have incurred billions of dollars in property-casualty underwriting losses, but the rate at which they’re raising premiums is outpacing inflation.

  • “Car insurance rates increased 19.2% in the 12 months through November, six times the rise in overall consumer prices, Labor Department data show.”

The result: “Some consumers are opting to forgo coverage—if they have a choice. Most mortgage lenders require borrowers to have home insurance.”

  • Continued cost increases will result in “insurance deserts,” places where private companies refuse to sell regular home insurance policies, one source told The Wall Street Journal.
  • These areas are already developing in high-risk areas, such as parts of Florida and “wildfire-prone San Bernardino County, California.”
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