What is Driving Up the Cost of My Home Insurance?

Why Have My Premiums Gone Up So Much?

People everywhere are asking the same question at insurance renewal time—especially those of us in Florida: “Why have my premiums gone up so much?”

The answer: “Well it’s complicated...”

This article explains some of the basic principles behind insurance, and why your homeowners coverage costs more now… but hopefully not for long.

Slide's 30-Second Summary:

• Insurance prices are determined by a variety of market and regulatory factors. 
• Inflation and increased natural catastrophe risk are creating a perfect storm for policyholders at renewal time. 
• Changes in Florida insurance laws will deliver relief to home insurance policyholders, but these reforms are intended as a long-term solution, and not a quick fix. 
• Nevertheless, there are actions every homeowner can take to make their house safer while potentially reducing annual insurance premiums.

Why Market Cycles Matter

First a few facts about insurance market cycles—and why they matter.

For almost a generation—from 2005-2021—property and casualty (P&C) personal line insurance carriers (i.e., home insurers, like Slide) mostly experienced what’s called a soft market, in which insurers collected premiums adequate to pay for policyholders’ covered losses. 

In any market, insurers are mandated to maintain a prescribed level of funds to ensure they have enough to cover worst-case-scenario losses. If an insurer does not have enough funds, they face insolvency. Since 2021, insurers have been in a hard market, with payments for covered policyholder losses exceeding the amount collected from policy premiums. These industry-wide conditions are expected to persist at least through 2024.

The bottom line: The value of your insurance coverage is directly related to how well your insurance company is positioned to pay out claims for covered losses.

Risks that Drive Insurance Rates Up in a Hard Market

A hard market makes things harder for policyholders and insurers — especially in Florida, where homeowners insurance premiums are nearly 300% above the national average. If you’re just coming up on renewal time, you might be experiencing a bit of sticker shock. Driving these insurance market cycles are factors each of us have experienced and felt, like inflation and increased catastrophe risk. Plus, there are costs unique to insurers, like reinsurance, which also have risen significantly in the past few years.

Florida’s insurance market is stressed...and has been for a long while. While Florida’s lawmakers can’t do anything about more frequent and powerful storms making landfall in Florida, they have gotten serious about bringing stability to the market.

Among recent reforms are laws to reduce costly litigation and to curb insurance fraud, which is the top driver of rising rates for Florida homeowners. The state accounts for 79% of the country’s homeowners insurance lawsuits—and this has a direct correlation to Floridians’ average premium being 300% higher than the U.S. average, according to the Insurance Information Institute.

Another principal factor causing everybody’s insurance premiums to spike is a force we’re all facing whenever we fill our tanks, stock the fridge, or pay a power bill:

Inflation. 

On top of the market conditions mentioned above (litigation and fraud), higher insurance bills reflect across-the-board inflation to the cost of labor and consumable goods, like construction materials. So, if your home was reappraised since your last coverage renewal and was determined to be underinsured relative to the cost to rebuild, your premiums will rise.

Steps You Can Take to Reduce Your Premiums

We’re confident Florida's recent insurance reforms will bring relief over the long haul, helping to make homeownership more financially sustainable for everybody.

In the meantime, you can also consult with your agent to determine if you can reduce the cost of your coverage for things like:

• Installing a new roof. Roof age plays a significant role in determining your rate.
• Adding wind-mitigation inspection credits, including hurricane shutters/additional window coverings, roof ties, and other items that can earn you discounts and protect against storm damage and wind blown objects.
• Changing your policy structure. Consider increasing your deductible, if you have enough money saved to pay higher out-of-pocket expenses from a loss.
• Installing security devices and/or home monitoring systems to protect against theft and vandalism.

Regardless of market conditions and premium costs, performing regular home maintenance and taking steps to reduce the risk of loss or damage due to a storm or even everyday wear-and-tear will benefit you in the long run.