Average U.S. homeowners insurance premiums have increased at a rate that has outpaced household income from 2003 to 2023, according to a report by Insurance Research Council (IRC).
In 2023 – the latest year for which data is available – homeowners spent an average of 1.99% of their income on homeowners insurance, up from 1.54% in 2003
Affordability of homeowners insurance varies significantly across states and has fluctuated over time. Utah was the most affordable state, while Florida ranked as the least affordable.
The cost of claims per insured home in the United States has increased at a rate outpacing inflation over the past 20 years.
Kansas, New York, and Washington, D.C. showed improvements in affordability, whereas California, Montana, and Wyoming experienced the greatest declines. Florida and Louisiana have consistently remained the least affordable states.
The IRC, affiliated with The Institutes like Triple-I, conducted an analysis of homeowners insurance affordability at both national and state levels, examining underlying cost drivers by state.
The report does not consider specific demographic or geographic risk profiles. It found that the frequency and severity of natural disasters, economic conditions, rising construction costs, and litigation significantly contribute to increasing homeowners insurance costs.
An understanding of what drives the cost of insurance is essential for consumers navigating the current insurance market
Dale Porfilio, FCAS, MAAA, IRC president and chief insurance officer for Triple-I
“Efforts to promote homeowner awareness and adoption of protective measures, strengthen state and local building codes, and encourage community resilience programs can all improve insurance affordability” said Dale Porfilio.
TOP 10 U.S. Homeowners’ Insurers
| Rank | Insurer | NWP $ mn | Share | Change |
|---|---|---|---|---|
| 1 | State Farm | 22,946 | 20.2% | 9.9% |
| 2 | Allstate | 11,075 | 9.8% | 15.4% |
| 3 | USAA | 8,398 | 7.4% | 12.0% |
| 4 | Liberty Mutual | 8,283 | 7.3% | 4.2% |
| 5 | Travelers | 6,336 | 5.6% | 17.0% |
| 6 | American Family | 5,709 | 5.0% | 15.4% |
| 7 | Farmers Group | 5,164 | 4.5% | 12.0% |
| 8 | Nationwide | 3,630 | 3.2% | 7.5% |
| 9 | Chubb | 2,969 | 2.6% | 6.4% |
| 10 | Erie Insurance Group | 2,191 | 1.9% | 12.7% |
TOP 10 U.S. Homeowners’ Insurers also continue to wrestle with insurance fraud and claim abuse following disastrous events. These trends have cut into profits and led several major insurers to reduce their capacity in some U.S. states or leave the homeowners market entirely.
A key findings:
- Countrywide average loss costs (average claim payment per insured home) increased throughout the past two decades and rose 9%.
- Claim severity is increasing, while frequency is declining—in part because of widespread adoption of higher policyholder deductibles, including percentage deductibles for specified perils, and premium surcharge programs designed to reduce the number of lower-cost claims.
- Catastrophe losses play an increasing role because of natural disaster trends and the methods used to define and categorize catastrophe claims.
- Average loss costs for claims vary widely by state. States with the highest loss costs are Louisiana and Mississippi; states with the lowest are Hawaii and Maine.
- States with the highest claim frequency over the period include Louisiana, Mississippi, and Oklahoma. States with the highest severity include California, Alaska, and Florida.
During the two decades of the study period, the U.S. homeowners market has experienced a surge in volatility, mainly driven by a barrage of disasters, such as hurricanes Katrina, Ike, Michael, Rita, Sandy and Wilma and California fires
Porfilio also noted that another challenge facing the homeowners insurance market is the continued threat of insurance fraud and claim abuse, especially after natural disasters.
“Industry and government organizations have increased efforts to inform consumers about potential scams, to investigate and prosecute the perpetrators, and to enact legislative changes to make systems less vulnerable to abuse,” Porfilio added.
FAQ
From 2003 to 2023, average homeowners insurance premiums rose faster than household income. In 2023, homeowners spent an average of 1.99% of their income on insurance, compared to 1.54% in 2003.
Utah ranks as the most affordable state, while Florida consistently remains the least affordable. Kansas, New York, and Washington, D.C. improved in affordability, but California, Montana, and Wyoming saw significant declines.
Key factors include the rising frequency and severity of natural disasters, economic conditions, increasing construction costs, and litigation. Catastrophe losses and the growing cost of claims also play a significant role.
Average loss costs per insured home rose 9% nationwide. While claim frequency has decreased due to higher deductibles and surcharge programs, claim severity has increased. Catastrophe losses have become a larger factor in overall claims trends.
The top insurers by net written premiums (NWP) in 2023 are:
State Farm ($22,946 mn, 20.2% share)
Allstate ($11,075 mn, 9.8% share)
USAA ($8,398 mn, 7.4% share)
Liberty Mutual ($8,283 mn, 7.3% share)
Travelers ($6,336 mn, 5.6% share)
American Family ($5,709 mn, 5.0% share)
Farmers Group ($5,164 mn, 4.5% share)
Nationwide ($3,630 mn, 3.2% share)
Chubb ($2,969 mn, 2.6% share)
Erie Insurance Group ($2,191 mn, 1.9% share).
Natural disasters like hurricanes and wildfires have increased volatility in the market. Catastrophes such as hurricanes Katrina, Ike, and Michael, as well as California wildfires, have driven up claims costs and impacted insurer profitability.
Insurers and government agencies are raising awareness about scams, prosecuting perpetrators, and advocating for legislative changes to reduce vulnerabilities. These efforts aim to minimize fraud and claim abuse, particularly following natural disasters.
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