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Along with the rising cost of living in many facets of families’ daily lives, property insurance availability and affordability continue to be a challenge across the U.S. Inflation has been persistently increasing repair, labor, and medical costs. And legal system abuse is plaguing the marketplace for consumers in every state. In a challenging time like this, it’s more important than ever to have state regulators aligned and focused on how to work together to empower consumers and improve the marketplace.

State regulators play a critical role in the health of state insurance marketplaces by monitoring solvency and market conduct, the twin pillars of state regulation. ÈȵãºÚÁÏ rates are heavily regulated by state insurance departments to make certain rates and profits are not excessive and that insurers maintain enough capital to pay claims. During times of inflation, insurers share regulators’ desire to protect consumers from higher costs. One of the best ways to do that is to foster healthy insurance markets that promote competition and drive innovation.

Yet in recent years, losses are outpacing premiums, which has resulted in turmoil in the insurance marketplace with consumers facing challenges with the cost and availability of insurance.

Earlier this year, ratings agency A.M. Best downgraded the entire personal lines insurance sector for the first time in history because of ongoing losses. Auto insurers have experienced the worst three-year stretch of losses in recent memory and homeowners insurers have had five consecutive years of underwriting losses. These massive losses and the corresponding increase in the cost of insurance are driven largely by inflationary pressures on repair and rebuilding costs and increasing severe weather. The property insurance marketplace also faces widespread challenges from legal system abuse that drive up claims costs and from regulatory burdens that complicate insurers’ ability to manage risk.

In the last five years, construction labor has increased 35.1% while building materials are up 37.3% – making the repairing and rebuilding of homes significantly more expensive, particularly after natural disasters. During the same time period, the cost of vehicle repairs increased by 22.2% and the cost of repair parts increased by 24.2%. Home and auto insurance are still playing catch-up to these cost increases.

More frequent and costly natural disasters are also driving up insurance costs. Last year, there was a record-setting 28 separate billion-dollar-plus weather events in the U.S. The devastation wrought by these events is exacerbated by more people living and building in areas that are high-risk, such as the hurricane-prone coastline and the wildland urban interface.

Simply put, insurers cannot provide the coverage that Americans rely on for increasing weather risks if premiums are not allowed to keep pace with rising losses. And yet, insurers recognize the financial stress this adds to a family’s budget, which is why we are advocating for meaningful solutions to help ease rising costs, such as stronger mitigation efforts to limit costly destruction from natural disasters, and working closely with regulators to address the unique cost drivers in their state, such as legal system abuse and fraud.

Florida is a great success story of what happens when the industry and the state insurance commissioner work together for the benefit of policyholders. Florida was once a hot-bed of claims-related litigation that drove up costs and led to insolvencies, but the state’s insurance marketplace has shown signs of improvement since the legislature passed critical reforms to reduce legal system abuse in the state. New insurers have been approved to write coverage in the state, other carriers are expanding their business, and many companies have either filed a rate decrease or no increase at all since the reforms were put in place.

While there is no silver bullet and each state has its own challenges, insurers are committed to working with state regulators and all stakeholders to provide consumers with the benefit of a healthy, competitive, and sustainable property insurance marketplace with accessible and affordable coverage options.

Topics Profit Loss