How much did homeowners insurance costs rise in Q2?

Leading property insurers secured rate increases this spring that are likely to hike homeowners’ premiums by a combined hundreds of millions of dollars, a new analysis finds. 

State Farm’s 11.3% approved rate increase in Minnesota will lead to a $108 million calculated premium change, the largest in the second quarter according to S&P Global Market Intelligence. The industry giant had five of the top 10 largest calculated premium changes in state-based rate hikes between April and June.

The largest approved rate change by an insurer was 56.4% at American Modern Property and Casualty Insurance Co., a Munich Re subsidiary, in California. That rate hike results in a $22.4 million calculated premium change and affects 17,425 policyholders, according to S&P.

“It concerns me that the homeowners out there are getting impacted that dramatically,” said Mike Fontaine, co-president and chief operating officer at San Diego-based Plaza Home Mortgage.

The leader at the third-party lender said he’s hearing from brokers about mortgage transactions falling through as a result of expensive coverage that sent debt-to-income ratios soaring. Brokers are asking prospective borrowers to get insurance quotes earlier in the home buying process.

“If you’re moving from a rental to homeownership, especially first-time home buyers, they’re going to be pretty shocked when they see how much the property insurance is going to be for them,” said Fontaine. 

The average homeowner’s insurance premium is $1,779 this year, rising at a faster rate than in prior years, according to insurance firm Matic. Renewal premiums are heating up even more, up 25% this year. 

S&P’s research drew upon filings with the System for Electronic Rate and Form Filing, or SERFF, a platform used by insurers and regulators. S&P noted the calculated premium changes determined from filings are not meant as projections. Second quarter data for Florida, where property insurance is particularly pricey, was unavailable.

In a statement Tuesday, Travelers said its approved adjustment in California, which S&P said produced a calculated premium change of $70.8 million, was a “necessary step toward aligning pricing to the risks that our customers are facing.”

A spokesperson for Munich Re said the company had no comment to share. Other insurers on on S&P’s list of the 10 largest calculated premium changes did not respond to requests for comment. 

At least 19 insurers had approved increases of greater than 25% in the second quarter, each affecting tens of thousands of policyholders. Large companies like Progressive and Nationwide made that list, alongside other lesser-known insurance subsidiaries.

The top 10 largest calculated premium changes were the result of approved rate increases as low as 6.9% to as high as 17.9%. All but one of those updates were in effect for new business as of Tuesday, while at least three were set to go into effect later this summer. 

Three of the top premium-change impacts were in California. Other than Minnesota, each major cost increase occurred in states east of the Mississippi River. 

More rate hikes are likely on the horizon. State Farm has requested a 30% rate increase in California, prompting concern from the state’s insurance regulator. Private insurance costs are forcing more borrowers to go to state insurers of last resort, like Citizens Property Insurance Corp. in Florida or California’s FAIR plan, which are also attempting to navigate high costs.