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States Buckling to Insurance Industry Demands
States are bowing to home insurers’ demands for insurance rate increases and lesser consumer protections to prevent residents from losing coverage. In the past year, one state stopped vetoing rate requests, while others allowed insurers to reduce storm coverage or expand the types of associated costs when setting rates.
A recent Wall Street Journal analysis revealed that states grant nearly all home insurer rate requests. According to an S&P Global Market Intelligence report, average state-approved 2023 rate increases are a mere 0.2 percentage points below industry requests. Data shows that 10 states with the power to reject requests upfront all approved increases, with half at or above the 20 percent national average.
Consumer advocates say insurers threaten state economies by forcing price or policy concessions. Many homeowners in California need help acquiring private coverage following an industry mass exodus. State Farm requested a 30 percent increase barely three months after a 21 percent increase and a rate-control exemption reserved for insurers in financial trouble. According to ratings firm AM Best, the insurer disclosed a $2 billion underwriting loss and nearly half of its five-year capital. Millions of Californians could suffer mass coverage loss if State Farm ceases operations, along with a devastating blow to the integrity of the residential property insurance market.
The industry denies threatening state regulators and claims that everyone suffers when operating costs in certain markets become unsustainable. HAM Best reports that home insurers lost $16 billion in underwriting costs in 2023, the largest in nearly 24 years, due to high inflation, rising climate-change-related natural disasters, and increased population in high-risk areas. Though the industry reported more healthy quarterly profits, advocates say they continue pushing for demands out of fears over forecasted extreme-weather losses. State regulators are not poised to push back.
To prevent companies from ceasing operations following back-to-back hurricanes, Louisiana lawmakers removed a rule preventing insurers from dropping long-time customers. They withdrew the insurance commissioner’s right to veto rate requests upfront. In 2023, Louisiana had the second-highest home insurance rates in the country, according to the Insurance Information Institute. After big storm-related losses, insurers in Arkansas can now reduce hail and wind coverage.
New Jersey homeowners have endured steadily increasing insurance rates since the early stages of the COVID-19 pandemic. Scores of insurance companies are requesting rate increases from the state due to rising inflation, home replacement values, higher building costs, and an increased frequency of catastrophic events.
According to the New Jersey Department of Banking and Insurance (DOBI), Clear Blue Insurance requested a 93.9 percent hike in rates. Regulators granted 20 percent. In 2023, regulators approved over 120 rate hikes and denied over $68 million in overall requested homeowner premium increases. As of May 2024, Allstate New Jersey Property & Casualty has asked for a 36.9 percent increase, MIC General requested a 36 percent hike, and Palisades Property & Casualty is seeking a 30.3 percent increase.
Some states are not meeting all insurers’ demands. Regulators can provide informal feedback on insurer rate requests, potentially prompting companies to lower requests. Several states are making requests to insurers in return for conceding requests. California has announced plans requiring insurers to approve more policies in wildfire-prone areas as a trade-off to allowing higher rates. Florida’s market is already improving after lawmakers made it harder for consumers to sue insurance companies, though it remains the most expensive state for home insurance.
The New Jersey Insurance Lawyers at Herold Law, P.A. Help Clients Fight Back Over Coverage Denials
If your insurance company is reducing or denying your home coverage, the experienced New Jersey insurance lawyers at Herold Law, P.A. can help. Call the firm at 908-679-5011 or contact us online to schedule an initial consultation. Located in Warren, New Jersey, we represent clients in Somerville, Morristown, and throughout the state.
