“I’m definitely noticing Congress taking a greater interest in reforming the National Flood Insurance Program (NFIP), given that we’re seeing not only repeat disaster supplementals that have to get written for uninsured losses, but also just the usage of NFIP. And it’s running up, bumping up against its cap and its borrowing authority,” Carroll added.
“So much of the system is designed around mopping up after the fact rather than thinking if we just could spend more on mitigation, building more public-private partnerships at the community level …. giving homeowners more options to weatherize and climate-proof their homes, or natural disaster-proof their homes.”
Resources stretched thin
Danny Thompson, vice president and co-owner of San Antonio-based Goosehead Insurance Sexton-Thompson Agency, said that he has felt the burn from the rising costs of premiums. The owner of a ranch in Plano, Texas, that was built only four years ago, Thompson said his premium went from $300 a month to more than $500. Extreme weather such as high winds and hailstorms have stretched Thompson’s wallet.
“Rates have gone up, in some cases 22% to 23%,” Thompson told HousingWire. “The reality is, in some cases, it’s doubled and tripled.”
Thompson noted that this issue began with pandemic-fueled supply chain delays. “When a house burns down, it usually takes six months to rebuild,” he explained. “But during the pandemic, materials took three months, labor was backed up and prices went up.”
As an example, he shared a case in which a condominium that burned down in 2021 took 13 months to rebuild, increasing the insurance payout due to loss of use.
Supply chain issues have stretched insurance carriers thin. As high rates deter buyers, insurers have become choosier about which homes and ZIP codes they’ll cover.
“Insurance carriers are getting more granular in their rating and looking at everything: ages of roofs, proximity to fire lines and fire departments, and they’re rating those differently,” Thompson said.
He recounted a case where a buyer received a quote of $1,300 to $1,500 per year for a home. He eventually chose a different house further from a fire station, which raised the premium to $400 a month. “He couldn’t afford that house and was a week out from closing,” Thompson said.
Thompson describes himself as an optimist and thinks that insurance rates will edge down in the future.
“It’s the new normal. We did get some notice that rates are dropping, but they’ve gone up so much that it doesn’t feel like a drop. But they have to keep rates up to be profitable,” he acknowledged. “If companies leave Texas altogether, it puts more pressure on everyone else to insure risky homes.”
Meanwhile, out West …
The pressure is on in other areas of the country too. Paul Scalone, a San Diego real estate and insurance agent, said he’s witnessed first-time homebuyers take a hard hit.
“I think that demographic is more sensitive to pricing changes than some of the more well-established, high net worth buyers,” Scalone said. “A home’s average cost in San Diego is just over or under a million dollars, give or take. You have interest rates that are almost 7%, so you’re looking at an average payment of $7,000 a month. Then you’re adding your taxes on that purchase price now, your insurance on top of that.”
Scalone has been an agent since 2019 and opened his own insurance company, Dignified. Insurance Services, in March. He said he hasn’t lost any deals to high or unexpected premiums, which he credits to education.
“A lot of the lending professionals that I work with closely, I’ve done a good job of educating them,“ he said. “They’re starting to calculate their estimated insurance payments higher than they were a year or two years ago.
“That being said, if we’re looking at a single-family home back in 2019 — let’s say, 1,500 square feet in San Diego — it’s going to cost you $1,300 a year. Now, fast forward to 2024, almost 2025, that same house is going to cost between $2,100 and $2,500 a year,” Scalone said.
James Kleimann contributed reporting to this story.
