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Matic has released its mid-year home insurance premium trends report, showing that there have been record declinations and product availability among carriers, specifically for new business requests.
Additionally, new data revealed a record year-over-year increase in annual home insurance premiums for both new policyholders and renewal business.
The data in the report underscores the recent trends the volatile insurance market has experienced. For states where insurance companies are experiencing premium change request delays, denials, or caps from insurance regulators, carriers are limiting or ceasing the writing of new policies, as a means to counter unsustainable loss ratios.
While this trend has been a longstanding challenge in Florida, it is now beginning to impact other states such as California, Georgia, South Carolina, New Jersey, New York, and Arizona.
“The increasing severity of natural disasters and the rising cost of construction is forcing mass-market carriers to reassess their growth strategies and put expansion on hold,” said Ben Madick, CEO and Co-Founder of Matic Insurance. “Carrier exits and restrictions are occurring more frequently in states that have strained relationships between regulators and carriers.”
The report notes a noticeable rise in online quote declinations over the past year, which present an additional obstacle for potential insurers.
Prior to the fall of 2022, declinations were relatively flat across the US, averaging around 18% between June 2019 through August 2022.
However, in the fall of 2022, declinations began to climb and throughout 2023 have averaged 36%, reaching an all-time high of 44% in June.
As a result, homeowners in the US experienced a significant reduction in policy options in 2023 compared to the previous year, with a 35% decrease in available policies per homeowner.
The sharpest decline occurred in April when availability dropped by 14% compared to the previous month.
The report illustrates a homeowner searching for coverage from 10 national carriers in March 2022 may have been eligible for an average of 6.08 home insurance policies, whereas in 2023, they would have only been offered an average of 2.87 policies, representing a substantial 53% decrease.
“This supply and demand issue makes securing an insurance policy, especially in problematic states, a major challenge facing homebuyers and mortgage lenders,” said Madick. “The notable decline in policy availability can lead to loan closing delays if insurance is not in place. Working with a digital insurance marketplace can reduce the time it takes to find and secure a policy, as the consumer will know immediately if their business is being declined. It’s important to note that less than 10 home insurance carriers offer the ability to bind a policy 100% online. Homebuyers and lenders need to prioritize insurance from the start of the loan closing process to account for wait times, especially for consumers bypassing a digital agency and working directly with carriers.”
The report notes major wait times experienced by regional carriers following mass-market carrier restrictions and exits. One example highlighted is when a national carrier announced their exit in California, a regional carrier in the state experienced a surge in demand and a staggering 500% increase in inbound calls.
In regions where rate increases are approved by state regulators, carriers are passing along the rate hikes. The report highlights home insurance premiums for new policyholders reaching an unprecedented record high, averaging a nearly 9% increase during the first half of 2023 compared to the previous year.
This marks a notable increase from the 5-6% rate of premium growth observed in 2021 and 2022. Prior to 2021, premium increases for new business had been more moderate, averaging between 2-4%.
Homeowners that stay with the same carrier and policy are experiencing an even steeper increase in renewal rate changes compared to new business.
Nationally, renewal rate changes typically average 10-12%. However, in 2022, renewal rates began climbing, reaching nearly 19%. The trend continued in the first half of 2023, with renewal rates averaging 24%, equivalent to a substantial $326 increase.
“Homeowners are universally impacted by rising rates, regardless of each person’s unique situation and it’s impacting new homebuyers and long-time homeowners even if they have never filed a claim,” said Madick. “New homebuyers need to be particularly in tune with the latest trends as the cost of insurance can impact their debt-to-income ratio. Not anticipating the rising cost of insurance at the beginning of the home buying and loan closing process could lead to a mortgage being denied during the underwriting process.”
To read the full report, including more data, charts, and methodology, click here.
