Study Reveals Inflation and Climate Change Cause Insurance Premiums To Reach Record Highs — Even For Homeowners With High Credit Scores
Columbus, OH. – June 28, 2022 – Matic, a leading insurtech platform, today released its mid-year premium trends report, highlighting insights from 45 property & casualty insurance carriers. Over the past eight years, Matic has been keeping a pulse on trends from this growing network of carriers across home, auto, and other personal lines of insurance.
According to Matic’s 2022 mid-year findings, which aggregated data from a random sample of 70,000 insurance policies and 5.4 million quoted properties, home insurance premiums in the US are rising faster than ever before — increasing at a record rate of 5.5% between June 2021 and May 2022. Comparatively, premiums rose just 1.1% between June 2019 and May 2020 and 3.9% the following year. A premium increase of 5.5% impacts homeowners by an extra $68 on average for a 12-month policy.*
This sharp rise in premiums correlates with skyrocketing Coverage A, or dwelling coverage — with an increase of nearly 10% noted between June 2021 and May 2022.* These increases, driven by the rising cost of building materials, skilled labor shortage, and an uptick in severe climate and weather-related disasters, are not expected to slow down any time soon. Additionally, record-high inflation rates are contributing to the growing cost to rebuild a home.
While premium increases are affecting the vast majority of American homeowners, certain groups are experiencing steeper rate hikes than others. Matic’s 2021 mid-year report indicated that those with lower FICO scores were disproportionately affected by rising rates, but according to 2022 data, that is no longer the case — with homeowners across all FICO groups experiencing high increases. In fact, report findings show that people with the best credit (800 or higher) are no longer better off. While these homeowners still have better rates than those with lower FICO scores, they saw the second highest premium increase of all groups at 8.3% in only one year.
Surprisingly, middle FICO groups (670-740) fared the best, experiencing the lowest increase in rates at just 4.4% — potentially revealing that market factors are affecting increases more than the individual homeowner’s financial profile.
“Insurance carriers look at many factors when deciding on rates,” said Ben Madick, CEO and co-founder of Matic Insurance. “Insurance-based credit score is one of those factors, along with someone’s history of filing claims. However, homeowners are now being universally impacted by rising rates, regardless of each person’s unique situation. The increasing severity and frequency of natural disasters and the soaring cost of construction are contributing to huge increases in replacement costs, which is leading to the high premium increases we’re witnessing. Interestingly, we’re seeing the cost of homeowners insurance rise even faster than inflation.”
The report also shows that location heavily impacts the level of premium increases, with homeowners in some states seeing costs rise at a rate of more than double the national average. For example, residents of Louisiana experienced a 17% increase in premiums — from $1,868 to $2,190 in the span of one year. Many other states, like Alabama, Missouri, and Delaware, also saw increases of well over 15%. Larger rate increases can be attributed to a greater risk for natural disasters or higher costs to rebuild a home in that area.
In addition to rate increases, a key finding from the report shows that it’s becoming harder to secure a new homeowners insurance policy, with some carriers discouraging and outright rejecting requests for new policies at a very high rate. An analysis of Matic’s carrier database revealed that carriers have recently instituted more barriers to obtain a policy. Since February 2022, Matic noted a 5% increase in new carrier restrictions, including an increase in the rate at which carriers are declining new business and the introduction of additional steps that a licensed agent may have to take to secure a policy. Fueled by oversaturation in some markets and higher occurrences of natural disasters, these metrics indicate that the industry is becoming more cautious — with carriers choosing to forego new business to alleviate risk.
Based on the current trajectory of rates, Matic foresees a continued surge. In the first six months of 2022 alone, homeowners experienced a 4.24% increase in premiums — paving the path for an expected increase of 7-9% by the end of the year. Data shows that homeowners have increasingly been adjusting their policies and switching to new carriers to combat this issue and secure the lowest available rates. Between June 2021 and May 2022, homeowners saved an average of $642 by comparing policies from Matic’s carrier network, indicating the importance of regularly monitoring coverage and rates.*
“Buying and owning a home is more expensive than ever in 2022, with mortgage interest rates continuing to rise and no sign that home prices will fall any time soon,” said Madick. “One small way to offset these costs is to monitor your policy, and review your rate annually to ensure you’re not overpaying. Matic allows you to compare top-rated carriers to get the best value.”
Matic’s proprietary insurance technology allows home and auto owners to shop online or work directly with a licensed advisor. With coverage in all 50 states and over 40 A-rated carriers available through their marketplace, Matic provides comprehensive property and casualty insurance for consumers beyond home and auto, such as umbrella, flood, earthquake, RV, motorcycle, and more.
For more in-depth pricing and underwriting insights, learn how Matic helps carriers identify relevant trends and understand the competitive landscape of property & casualty insurance.
*Methodology: Home insurance premiums and Coverage A are an average from a random sample of 70,000 policies and 5.4 million quoted properties analyzed from June 1, 2018 through May 31, 2022. Average savings of $642 is calculated based on the average of the difference for Matic customers’ prior insurance policy and their new policy for all homeowners who found savings, submitted to Matic between June 1, 2021 and May 31, 2022. Includes homeowners who became Matic policyholders and where the customers’ prior insurance premium amount is known to Matic.
Since 2014, Matic has changed the landscape of the insurtech industry by integrating insurance within the home and auto ownership experience. Today, Matic’s digital insurance marketplace has over 40 A-rated home and auto carriers, as well as distribution partners in industries ranging from mortgage origination and servicing to banking, real estate, and personal finance. With a single-minded focus on advocating for policyholders, Matic has created an effortless and transparent comparison-shopping process, saving customers days of work and over 30% in premiums each year. For more information, visit matic.com.