Why Insurance Costs Are Rising Across the United States
Published Date: 10/01/2024
If you’ve opened your latest insurance renewal notice and been stunned by the increase, you’re not alone. Across the country, homeowners, renters, and drivers are facing steep premium hikes. From Florida’s hurricanes to California’s wildfires, insurers are recalibrating for a world where “once-in-a-century” disasters now seem to happen every year.
In a recent episode of Insurance Hour, host Karl Susman explored the forces behind today’s insurance crisis — from catastrophic weather to regulatory constraints — and offered practical insight for agents and consumers trying to navigate the turbulence. His conclusion was clear: this is not a temporary spike. It’s a systemic reset.
Catastrophe Nation: When Every State Feels the Shock
“We have catastrophe events happening literally from sea to shining sea,” Susman said, pointing to hurricanes in Florida and wildfires in California as parallel examples of a nationwide problem.
Insurance relies on uncertainty — pooling risk so the many who never file claims offset the few who do. But when billion-dollar disasters strike year after year, that math begins to break down.
“How do you turn around and price something where there’s a near certainty that there’s going to be a loss?” Susman asked.
The result has been a historic tightening of insurance availability. In California alone, roughly 90% of property insurers have stopped writing new policies. Fewer options mean higher prices and growing dependence on last-resort programs like the California FAIR Plan.
How Insurance Pricing Really Works
At its core, insurance pricing is a calculation of risk and probability. Companies collect premiums based on how often they expect to pay claims and how severe those claims are likely to be.
- When the likelihood of a claim is low, premiums are lower.
- When the likelihood is high, premiums rise.
The challenge now is that insurers are facing near-certainty in some regions. Wildfire seasons are longer, hurricanes are stronger, and climate volatility is outpacing the predictive models that once guided rates. The impact isn’t limited to homeowners — auto, renters, and even life insurance are feeling the same economic pressure.
The Hidden Complexity of Insurance Billing
During the episode, a caller raised an issue many consumers never consider: how insurance billing is handled at the agency level.
With direct billing, the insurer invoices the customer directly. With agency billing, the agent collects payment and sends it to the carrier — a manual, time-consuming process involving invoicing, depositing, and reconciling funds.
“It really is a tough process,” the caller noted.
Susman agreed and recommended digital billing platforms like AgentSnap, which automate financing and premium collection. Streamlining agency operations allows brokers to spend less time on accounting and more time helping clients navigate rising costs.
Earthquake Insurance: The Coverage Most Homeowners Don’t Have
Susman also highlighted a major coverage gap for Californians: earthquake insurance. Standard homeowners’ policies do not cover earthquake damage.
“Did you know that earthquakes are not covered by your homeowner’s insurance policy?” he asked listeners.
Despite living in one of the most seismically active regions in the world, most Californians carry no earthquake coverage at all. Susman pointed to private carriers like GeoVera, which offer customizable earthquake policies outside the state-run California Earthquake Authority (CEA).
How the Northridge Quake Changed Insurance Forever
The 1994 Northridge earthquake — a $40 billion disaster — reshaped the California insurance market. At the time, insurers were required to offer earthquake coverage alongside homeowners’ policies. The potential exposure was so great that many carriers stopped offering both entirely.
“For over a year, property insurance carriers were not offering insurance because of that requirement,” Susman explained.
That regulatory standoff led to the creation of the CEA, which now provides basic earthquake coverage. Its policies meet legal requirements but often include high deductibles and limited personal property coverage. Today, the CEA operates alongside private insurers that offer broader options at varying price points.
Why Timing Matters for Earthquake Coverage
After any significant earthquake, insurers impose a moratorium on new earthquake policy sales.
“It’s not really fair to buy a policy when it’s almost a certainty that within the next 24 or 48 hours, you’re going to have another shake,” Susman said.
The takeaway is simple: the best time to buy earthquake insurance is before the next quake — not after it’s already happened.
The Auto Insurance Rate Problem Everyone Feels
Few insurance products generate as many complaints as auto coverage.
“I’ve been paying for 10 years without a single claim,” one consumer asked, “now I have one accident and my rate goes up. How is that fair?”
Susman explained that auto policies typically renew every six months. Each renewal gives insurers the chance to reassess risk based on recent behavior.
“You’re a different risk profile at that point,” he said. “They’re not trying to gouge you — they’re just using math.”
Premiums reflect your current risk, not your driving history from a decade ago.
How California Regulations Shape Auto Insurance Rates
California’s consumer protection laws tightly regulate how insurers can price auto policies. For example, after three years, a driver with multiple speeding tickets can legally qualify for the same Good Driver Discount as someone with a perfect record.
While these rules are designed to protect consumers, they also limit insurers’ ability to price risk accurately. When flexibility is restricted, broader rate increases often follow.
Life Insurance and the Discomfort of Planning for Death
Life insurance is often avoided because it forces people to confront uncomfortable realities.
“In our country, death is viewed very differently than it is in other parts of the world,” Susman said.
That discomfort leaves many families financially exposed. Susman emphasized the value of term life insurance for mortgage protection and income replacement, contrasting it with older mortgage protection products that lose value over time.
He also explained permanent insurance options — whole, universal, and indexed life — which provide lifelong coverage and potential cash value accumulation. His advice was to work with a true life insurance specialist, not simply someone who handles auto or home policies.
Renters Insurance: Affordable but Often Overlooked
As homeownership becomes less attainable, more Americans are renting. Yet many renters underestimate their financial exposure.
“Renter’s insurance flies under the radar,” Susman said. “People think, ‘I don’t own anything valuable,’ but that’s not the point.”
Renters insurance primarily provides:
- Personal property protection for fire, theft, and water damage
- Liability coverage if a renter causes injury or damage to others
For roughly $500 a year, renters can often secure around $30,000 in property coverage and up to $500,000 in liability protection — a small price for substantial financial security.
Why All Types of Insurance Are Rising Together
The surge in costs across home, auto, life, and renters insurance is driven by three connected forces:
- Climate risk intensification – More frequent, more severe disasters
- Reinsurance cost increases – Insurers’ own protection is becoming dramatically more expensive
- Regulatory lag – Outdated approval systems prevent faster market adaptation
Together, these pressures create what Susman described as a “near certainty of loss” environment — one that no pricing model can safely absorb without higher premiums.
Final Thoughts: Knowledge Is the Best Protection
Consumers can’t control wildfires, hurricanes, or regulatory systems. But they can control how informed they are.
Susman’s key advice was consistent throughout the episode:
- Know what your policy includes and excludes
- Purchase specialty coverages, like earthquake insurance, before you need them
- Understand that premium increases reflect real-world risk, not simply corporate greed
- Work with experienced brokers who understand both coverage and market shifts
“We have to remember what insurance really is,” Susman concluded. “It’s about transferring risk — protecting yourself against the unknown. And right now, the unknowns are bigger than ever.”
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