In today’s rapidly changing world, the concept of a “new normal” is becoming increasingly common. From shifts in work culture to changes in shopping habits, it applies to almost every aspect of our daily lives. Insurance is no exception. As Karl Susman, host of The Insurance Hour, explains, both consumers and insurers are grappling with unpredictable weather, rising costs, and inflationary pressures, all of which are reshaping how risk is assessed and priced. The challenges presented by wildfires in California, floods in Texas, and inflationary pressures have created a perfect storm that’s forcing insurers to adapt quickly.
This blog breaks down the key insights from Susman’s discussion, covering the impact of inflation on premiums, the disparity in rates across states, and what consumers can do to manage costs and protect themselves in this new insurance landscape.
1. Weather Unpredictability: The True Meaning of “New Normal”
Susman opens by highlighting the growing unpredictability of weather, especially in California. Flash floods and severe storms, once considered rare, are now routine occurrences. This unpredictability is a major factor in the rising cost of insurance. For example, in Texas, wildfires recently destroyed over 500 homes, and many of the affected homeowners were uninsured.
Susman pointed out that the main reason people went without insurance was high premiums, which raises an important question: Are rising costs pricing people out of protection, or are consumers simply underestimating the true cost of being uninsured? According to Susman, the rising insurance costs are not random. They are a direct response to increasingly frequent and severe weather events that are affecting not just California or Florida but regions nationwide.
2. Why Premiums Differ So Widely Across the U.S.
Insurance premiums can vary greatly from state to state, and Susman provides some eye-opening statistics to illustrate this disparity:
- Alabama: $2,085 average annual homeowners premium
- Alaska: $1,019
- California: $1,266
- Colorado: $3,212
- Kansas: $4,072
- Oklahoma: $4,565
- Vermont: $694
While these differences might seem arbitrary, they reflect real disparities in risk. Premiums are based on factors like loss history and rebuild costs. In areas with frequent natural disasters such as tornadoes in Oklahoma or wildfires in California, premiums are higher because of the greater risk of loss.
“Insurance rates aren’t set by someone flipping a coin,” Susman said. “They are based on actual data: what it costs to rebuild after a loss, how often losses occur, and what risks exist in that region.” Premiums are rooted in data, not mystery.
3. The Inflation Effect: Why Everything Costs More (Including Insurance)
One of the most straightforward explanations for rising premiums is inflation. Just like consumers, insurers are facing higher costs across the board. This includes everything from construction materials to labor costs and temporary housing.
For example:
- Construction materials like lumber, steel, and concrete have risen dramatically.
- Labor shortages and wage increases are driving up the cost of repairs and services.
- The cost of modern vehicle repairs has also increased as cars become more complex.
These higher costs feed directly into insurance premiums. “You can’t say everything costs more but insurance should stay the same,” Susman emphasized.
4. The Data Behind the Increases
The states with the highest increases in homeowners’ premiums in 2023 are no surprise. Many of them have faced major natural disasters like hurricanes, floods, and wildfires. These include:
- Florida
- Louisiana
- California
- Texas
- Oklahoma
- Kansas
- Colorado
- Mississippi
- Arkansas
- Missouri
As Susman pointed out, these states weren’t prepared for the scale of losses they’ve experienced. The rates were underpriced for years, and now insurers are recalibrating premiums to align with the actual risks.
“Hurricane damage, wildfires, and floods are real threats,” Susman said. “This correction was necessary for long-term stability.”
5. Consumer Power: What You Can Do to Lower Your Premiums
While many of the factors driving up premiums are beyond homeowners' control, there are steps consumers can take to manage their costs. Susman highlighted several strategies:
A. Ask for Every Available Discount
Insurance agents can be invaluable allies. To get the best possible rate, ask your agent to provide a list of every discount available. These might include bundling discounts, safety upgrades, senior discounts, or loyalty rewards.
B. Raise Your Deductible (Strategically)
Raising your deductible is one of the most effective ways to lower your premiums. A higher deductible means lower premiums, and it also discourages making small claims, which can raise rates over time.
C. Adopt Smart Technology
Smart home devices like water sensors, motion detectors, and smart thermostats can prevent disasters before they happen. Many insurers offer discounts for homes with these devices, as they reduce the risk of loss.
D. Participate in Fire-Safe Programs
In wildfire-prone areas, programs like Safer from Wildfires encourage homeowners to implement fire-resistant roofs, defensible space, and ember-resistant vents. These measures can not only lower your premium but also make your home more resilient to fire.
E. Avoid Coverage Gaps
Ensure that all of your valuables are properly insured. Standard homeowners policies may limit coverage for items like jewelry or home-based businesses. Speak with your insurer to ensure everything is adequately covered.
6. The Psychological Shift: From Blame to Understanding
Rising premiums often evoke strong emotions. Susman urges consumers to look beyond the frustration of rising costs and understand the bigger picture. “Insurance is a reflection of the world’s economy,” he said. “Everything costs more, and that affects premiums.”
Instead of assigning blame to insurers, consumers should focus on understanding the relationship between inflation, climate risks, and insurance costs. The more consumers understand these factors, the better equipped they will be to make informed choices about their coverage.
7. The Road Ahead: Adaptation and Awareness
The “new normal” in insurance isn’t about defeat. It’s about adaptation. Homeowners can take meaningful steps to protect themselves, including staying informed, adopting technology, and maintaining proactive communication with their agents. At the same time, regulators must continue to balance affordability with solvency to create a sustainable market.
As Susman concluded, “Insurance may not be the most exciting topic, but it’s one of the most important. Understanding what you have—and how it works—can save you a lot more than just money.”
In Summary:
The forces reshaping the insurance industry—climate volatility, inflation, and regulatory reform—are here to stay. But informed consumers have power. By understanding the “why” behind rising premiums and taking advantage of available tools and programs, homeowners across the U.S. can navigate this new normal with confidence and clarity.
