“I’m definitely aware Congress taking a keen interest in reforming the National Flood Insurance Program (NFIP), as we see it is not just repeating the disaster additions that must be written for uninsured losses, but also the use of the NFIP. And it’s going up, it’s against the cap and its borrowing authority,” Carroll added.
“A lot of the program is designed to reverse the reality rather than thinking that we can spend more money on mitigation, create more public-private partnerships at the community level …. to give homeowners more options to deal with the climate and weatherproof their homes, or protect their homes from natural disasters.”
Resources are stretched thin
Danny Thompson, vice president and owner of the San Antonio-based Goosehead Insurance Sexton-Thompson Agencyhe said he felt the burn due to the increase in premium costs. The owner of a farm in Plano, Texas, which was built only four years ago, Thompson said his initial income went from $300 a month to more than $500. Bad weather like blizzards and hail stretched Thompson’s wallet.
“Rates have gone up, in some cases from 22% to 23%,” Thompson told HousingWire. “The truth is, in some cases, it’s doubled and tripled.”
Thompson noted that the problem began with delays caused by the pandemic. “When a house burns down, it usually takes six months to rebuild,” he explained. “But during the pandemic, the materials took three months, the workers were supported and the prices went up.”
As an example, he shared a case where a condominium that burned in 2021 took 13 months to rebuild, which increased the insurance payment due to loss of use.
Supply chain problems have caused insurance carriers to shrink. As high rates deter buyers, insurers are becoming more selective about which homes and ZIP codes to cover.
“Insurance carriers are getting granular in their ratings and looking at everything: the age of the roof, the proximity of fire lines and fire doors, and they rate those differently,” Thompson said.
He recounted a case where a buyer received a quote of $1,300 to $1,500 per year for a home. In the end he chose a different house from the fire station, which increased the premium to $ 400 per month. “He couldn’t pay for that house and it was a week away from closing,” Thompson said.
Thompson describes himself as an optimist and thinks insurance rates will go down in the future.
“It’s the new normal. We’ve had notices that prices were going down, but they’ve gone up so much it doesn’t feel like a drop. But they have to raise the rates to make a profit,” he agreed. “If companies leave Texas entirely, it puts a lot of pressure on everyone to insure dangerous homes.”
Meanwhile, in the West…
The pressure is also present in other parts of the country. Paul Scalone, a San Diego real estate agent and insurance agent, said he’s seen first-time homebuyers struggle.
“I think that demographic is more sensitive to price changes than other more established, high-value consumers,” Scalone said. “The average cost of a home in San Diego is just over a million dollars, give or take. You have interest rates of around 7%, so you’re looking at an average payment of $7,000 per month. Then add your taxes to that purchase price now, your insurance on top of that.”
Scalone has been an agent since 2019 and opened his own insurance company, Honorable. Insurance Servicesin March. He said he has never lost contracts for high or unexpected premiums, which he put into education.
“Most of the money lending experts I work closely with, I have done a good job teaching them,” he said. “They are starting to calculate their insurance premiums higher than they were a year or two ago.
“That being said, if we look at a single-family home back in 2019 — say, 1,500 square feet in San Diego — it’s going to cost $1,300 a year. Now, fast forward to 2024, about 2025, that same house will cost between $2,100 and $2,500 a year,” said Scalone.
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