Brutal storms—including some that hit quite a few years ago—are causing rates on homeowner’s and flood insurance policies to skyrocket.
According to the Coloradoan, locals in northern Colorado who have grown accustomed to rates inching up annually due to simple inflation have suddenly been subject to rate hikes in the neighborhood of 30%. Insurers say that increases are necessary in light of years of natural disasters—which have resulted in years of high payouts for homeowner’s insurance claims. In Colorado, the recent streak of damaging weather began in 2009, the most expensive hail season in the state’s history, and has continued on with severe wildfires and floods.
The rate hike phenomenon is hardly limited to Colorado. Earlier this year, angry homeowners in North Carolina voiced their frustrations with the local insurance industry’s request for rate increases of 25%. The increases, which would come just a year after a 7% rise in premiums was OK’d, are necessary due to “substantial windstorms, tornadoes, hail storms” in the state, insurers argue.
During a conference call with analysts last week, the Hartford Financial Services Group announced plans to “raise rates, increase wind and hail deductibles, and offer policies with reduced coverage to improve profits” for a wide range of homeowners, according to the Hartford Courant. The Hartford and other insurance companies are taking action specifically in Tornado Alley, the swath of states in the middle of the country where wind, hail, and tornadoes are most likely to wreak havoc. And they’re reportedly taking action not in response to a one-time disaster but based on weather events (and corresponding costs for insurers paying out claims) that kicked off back in 2008, when damage from hail and wind caused record losses.
One Colorado resident who gets his homeowner’s insurance via The Hartford had an understandable reaction after seeing his annual premium hit $912, up from $688 a year ago. “It pisses me off they raised it that much,” he said simply, per the Coloradoan. The rate soared even though the family has never filed a claim with the insurer.
Meanwhile, far beyond Tornado Alley, homeowners living near the coast and in other flood-prone areas are concerned about changes to government-subsidized flood insurance policies that could bring annual rate increases of around 25%. Some of the changes went into effect last October, leaving some homeowners with flood insurance rate hikes of 50% in the aftermath of catastrophic events like Hurricane Katrina.
If nothing else, the uncertainty about the degree to which flood insurance will be subsidized is directly affecting the housing market in flood-prone spots. “Homeowners are having a tough time in places like Florida when it comes to selling,” the CEO of one Florida-based insurer explained to CNBC. “Without knowing what flood insurance premiums are going to cost, it will keep potential buyers away.”
Likewise, the possibility of ski-high flood insurance premiums is causing a chilling effect on the real estate market in coastal areas like Aberdeen and Hoquiam in Washington state. The (Aberdeen) Daily World cited one couple scared off by the prospect of purchasing a B&B because the flood insurance could be over $9,000 per year. Homes that don’t serve as primary residences are subject to higher flood insurance increases, with one property jumping from $596 to an extraordinary $4,583 annually.