Homeowners Insurance Costs Soar

Flooding Propelled by massive pay-outs as a direct result of hurricane damage, Florida has the highest homeowners insurance premiums in the nation, according to a new industry study. The rise in policy costs account for more than a 10% increase in annual premiums. Other states are also experiencing large rate hikes.

“Most homeowners over-pay for insurance and they don’t even realize it,” said Kevin Wright, an insurance industry consumer advocate in Palm Beach, Florida. “Studies show that renters pay as much as 40% too much and homeowners pay up to 60% more than they have to.”

Officials with the National Association of Insurance Commissioners (NAIC) say the increase in Florida does not include homeowners insurance underwritten by Citizens Insurance, a state run pool that accounts for properties most at risk. In Florida the average cost of a policy is $1,534, reflecting a one-year average rise of $148. Additionally, the NAIC study did not include most private insurance rate increases in Florida. Industry analysts estimate the full increase in annual premiums to be closer to an average of 15%.

Insurance Rates

State Average Premium Change
Florida $1,534 Up 10.7%
Texas $1,448 Up 2.8%
Louisiana $1,400 Up 11.4%
Oklahoma $1,054 Up 3.5%
Massachusetts $1,023 Up 10.6%
Mississippi $1,019 Up 2.1%
Rhode Island $950 Up 3.4%
New York $936 Up 7.7%
Connecticut $929 Up 5.8%
California $925 Down 1.3%
National Average $822 Up 2.2%

Source: National Association of Insurance Commissioners

Industry representatives say the study demonstrates the high cost of losses forces the insurance industry to charge more for policies where there is a higher risk of catastrophic damage from hurricanes, tornadoes, ice, hail storms and wildfires, despite compiling record profits at an average of 40% per policy.

Texas accounts for the second highest rate of average homeowners insurance at $1,448 annually. The state did have the highest rate in the country until it was replaced by Florida in the study, which examined 2007 data, the latest annual information available.

Consumer groups recommend shopping for homeowners and rental policies annually to get the best price available for the same coverage, and then reading policies after they are delivered to make sure the coverage is what is wanted.

A spokesman for Texas Watch, a consumer group monitoring the insurance industry, says weak state regulation and giving into insurance lobbyists has hurt the industry. “The industry for years has been wanting to show that Florida is more expensive than Texas. My response to that is big deal,” said spokesman Alex Winslow. “So we’re both paying through the nose. Being No. 2 is nothing to be proud of.”

Sky-rocketing insurance premiums combined with one of the highest state property tax rates in the country has driven tens of thousands of people to move from Florida in recent years. The state’s unemployment rate is also one of the highest in the country, triggering further declines in home values.

The insurance industry recorded a record $44.8-billion profit in 2005 at the height of the worst hurricane season in decades as Hurricane Katrina wiped out or damaged more than 240,000 homes in Louisiana and Mississippi.

Facing mounting criticism and calls for industry controls nationally, insurance industry executives say homeowners should shop for the best plan and price on homeowners insurance available, and to expect higher premiums in the future.

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