What’s Being Done About Runaway Home And Auto Insurance Rates

Both home and auto insurance rates have soared since 2020, with triple-digit increases in the cost to protect homes some states, according to an analysis by The Wall Street Journal.

Homeowners insurance rates have climbed by an average of 50 percent nationwide, while auto insurance rates have seen a 42 percent increase. These rate increases significantly surpass the 26 percent increase in consumer prices through August, according to S&P Global Market Intelligence and Labor Department data.

The mounting financial burden of escalating home and auto insurance premiums has ignited public outcry, pushing lawmakers in states across the political spectrum to confront the issue head-on. Both Democrat- and Republican-led states are under pressure to enact legislation that would impose caps on these rates, reflecting a bipartisan concern over the affordability and accessibility of essential insurance coverage.

“Rate increases are top of mind for every policymaker across the country. Consumers are going to them and saying, ‘I can’t deal with a 30% rate increase, or a 40% rate increase’,” Jon Godfread, president of the National Association of Insurance Commissioners, told The Journal.

With the lone exception of Wyoming, states are required to file notice of rate increases, according to the National Association of Insurance Commissioners. Lawmakers can reject increases in Alabama, California, Hawaii, Mississippi, New Jersey, North Carolina, North Dakota (for increases of 5 percent or more), Pennsylvania, South Carolina (7 percent or more), Washington and West Virginia.

Other states are at the mercy of insurers. The U.S. insurance market, founded in 1752, was developed and is regulated at the state level. State insurance commissioners were appointed in the 1850s. In the 1940s, Congress exempted insurance from federal antitrust laws, allowing states to legislate on prices.

Pending legislation in Illinois seeks regulatory changes that would give the state’s insurance commission veto power over increases it deems excessive. New York lawmakers are looking at soaring home insurance costs, and Democratic lawmakers in Michigan this summer proposed a law that would cut auto insurance rates by 10 percent.

Insurers contend that while price caps may offer short-term appeal, they ultimately lead to long-term harm.

“Price controls don’t lead to affordability,” Tim Zawacki, an analyst at S&P Global, told The Journal. “Ultimately, they just chase insurers out of the market.”

Regulators in California recently greenlighted double-digit home insurance rate increases after big insurance companies like State Farm threatened to pull out of the market. For decades, the state had a 6.9 percent ceiling on homeowner premium prices, resulting in rates below the national average despite expensive real estate and vulnerability to wildfires.

» Read the full story in The Wall Street Journal.