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Buying Home and Auto Insurance Is Becoming Impossible

Buying Home and Auto Insurance Is Becoming Impossible

From the Wall Street Journal

By Jean Eaglesham
Jan. 8, 2024 

After Allstate suffered billions of dollars in losses and failed to get the rate increases it wanted, it resorted to the nuclear option.

The insurance giant threatened last fall to stop renewing auto insurance for customers in three states that hadn’t given in to its demands, which would have left those policyholders scrambling for coverage. The states blinked.

In December, New Jersey approved auto rate increases for Allstate averaging 17%, and New York, a 15% hike. Regulators in California are allowing Allstate to boost auto rates by 30%, but still haven’t decided on its request for a 40% increase in home-insurance rates after the insurer refused to write new policies.

For many Americans, getting insurance for both their cars and homes has gone from a routine, generally manageable expense to a do-or-die ordeal that can strain household budgets.

Insurers are coming off some of their worst years in history. Catastrophic damage from storms and wildfires is one big reason. The past decade of global natural catastrophes has been the costliest ever. Warmer temperatures have made storms worse and contributed to droughts that have elevated wildfire risk. Too many new homes were built in areas at risk of fire.

As losses mounted, inflation only made matters worse, boosting the cost of repairing or replacing cars or homes.

Climate change also has made it harder for insurers to measure their risks, pushing some to demand even higher premiums to cushion against future losses.

“I have never seen the overall market this bad,” said Barry Gilway, a 52-year veteran of the industry who retired in 2023 as head of Florida’s Citizens Property Insurance, a state-created insurer of last resort that sells plans to people who can’t get coverage elsewhere.

Homeowners and drivers are facing sharply rising premiums, less coverage and fewer, if any, choices of insurer. In some places, the only options are bare bones coverage or none at all. That can make homes worth less and harder to sell, and cars less affordable.

Farmers Insurance Group increased home-insurance rates by more than 23% last year for tens of thousands of policyholders in both Illinois and Texas, according to S&P Global Market Intelligence. Nationwide Mutual said it won’t renew 10,525 home-insurance policies in hurricane-prone areas of North Carolina.

State Farm racked up $13 billion in property-casualty underwriting losses in 2022, its worst ever. Last year, it stopped writing new home-insurance policies in California. The state’s regulators last month approved a 20% home-insurance rate increase.

“This is just the worst possible scenario you could think of for consumers,” said Timothy Gaspar, head of a Los Angeles-based insurance agency. The mass retreat of insurers from the state means there is nothing to offer people seeking new home or auto insurance, he said.

A Farmers spokeswoman said its rate increases were designed to “better reflect the increased risk and claims costs we continue to face.” A Nationwide spokesman said the company was being more selective about where it writes policies in response to inflation and market disruptions.

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