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How Home Insurance Premiums Are Weathering Natural Disasters

With natural disasters impacting everything from delinquency rates to property preservation, there's no question that the state of the weather will continue to be a critical factor for the industry to watch and adapt to in the years ahead. A new report from LendingTree's QuoteWizard recently put the long-term effect of disasters on home insurance rates under the microscope, finding an increase of as much as 88% between 2007–2016.

Working from the National Association of Insurance Commissioners' (NAIC) annual report on insurance trends and stats, QuoteWizard compared annual home insurance rate data from the 2016 report (the latest full-year data available) to the that from NAIC’s 2007 report. QuoteWizard's report found that almost two-thirds of home insurance losses come from wind, hail, and water damage, and added that states in the Midwest experience severe weather more frequently, leading to higher insurance rates.

“Every year in the United States, natural disasters account for tens of billions of dollars in damages,” the report reads. “A significant portion of those damages falls on the shoulders of insurance companies. When insurance companies experience huge loss from natural disaster-related claims, they compensate for that loss with an increase in home insurance rates.”

Between 2007–2016, Kentucky saw the largest increase, with insurance premiums rising 88% to $1,085 in 2016, up from $578 in 2007. Although Kentucky is not located in Tornado Alley, it is no stranger to severe weather, and those events are becoming more common in the southeastern United States. According to QuoteWizard, $10-billion tornado events are not uncommon, and southern states have “the greatest potential for increased tornado disasters by the end of the century.”

Oklahoma saw its premiums increase by $821 over that decade—the highest dollar-amount increase in the nation. While Oklahoma is less than half the size of California, it had declared 189 natural disasters since 1955, according to FEMA.

According to the QuoteWizard report, Louisiana had the highest reported premium in 2016 at $1,967, which is a 41% increase over 2007. Nevada’s 7% increase in premiums since 2007 was the lowest in the nation, resulting in premiums rising $47 to $742. Oregon’s reported premium of $659 was the lowest in the nation.

You can read QuoteWizard's full analysis of the decades' worth of NAIC data by clicking here. You can also read more about the impact of natural disasters and underinsurance on delinquency by clicking here.

To participate in critical conversations on diligence and preparedness, be sure to register for the Five Star Disaster Preparedness Symposium, happening June 5–6, 2019, at the Hotel Monteleone in New Orleans. You can learn all the details and register here.

About Author: Mike Albanese

Mike Albanese is a reporter for DS News and MReport. He is a University of Alabama graduate with a degree in journalism and a minor in communications. He has worked for publications—both print and online—covering numerous beats. A Connecticut native, Albanese currently resides in Lewisville.
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