Insurance premiums are on the rise -- here's why
Apr. 19—Insurers are hitting many homeowners with stiff increases in premiums.
One insurance company hiked home insurance premiums in Berlin by $815 last year.
Another one raised bills in Manchester by $420. Yet a third actually cut prices in Concord by $120.
All three used the same coverage scenario in filing rates with the New Hampshire Insurance Department.
Several cities in the state have upward of three dozen companies that insure homes, with a majority instituting price hikes in 2023. Within the same ZIP code, premiums can vary by as much as $2,000 a year in Nashua and in Portsmouth for the same amount of coverage.
More than 100 companies offer some type of home or property insurance in New Hampshire.
Some target different credit score levels or might offer premium customer service, according to Andrew Demers, spokesman for the Insurance Department.
"The bottom line is that different carriers place a different value on the same risk," he said. "Ultimately, this is why we advise consumers to shop around, perhaps even annually."
By one measure, New Hampshire's average home insurance premiums ranked second-lowest in the nation, behind only neighboring Vermont.
New Hampshire homeowners' rates went up an average 11.3% over a two-year period ending in 2023, but less than the national average of 18.2%, according to S&P Global Market Intelligence.
Rates to insure vehicles surged by a higher percentage than home insurance in New Hampshire.
"Both the personal auto and homeowners over the last two years or so, we've seen significant upticks in rates," Christian Citarella, chief property and casualty actuary at the state Insurance Department, said at a recent symposium.
What's driving costs
Consumers must incorporate these increases into their family budgets alongside higher prices for gasoline and food. Others must factor insurance premiums into a potential new mortgage payment.
"Unsurprisingly, one of the most frequent questions that we get is 'Why are my premiums going up? Why am I not able to get access to coverage that I've been able to get to before?" said Insurance Commissioner D.J. Bettencourt.
The reasons are simple and many.
"No, it's not just about greedy insurance companies," Bettencourt said.
Bad weather here and elsewhere, higher prices on materials to repair or replace homes or vehicles, and huge increases in what insurance companies must pay to insure against their own potential losses have combined to drive sharp spikes in the cost of auto and home insurance policies.
"I think a lot of us in New Hampshire like to think that we are the captains of our own destiny, and unfortunately in the insurance industry, we are all connected both nationally and internationally, and those macro issues do have an impact right here for the New Hampshire consumer," Bettencourt said.
More severe weather episodes here at home also threaten to boost rates — including for flood insurance.
"When looking at the data directly related to NH, the risk to climate exposure (and insurance increases) is driven by increases in precipitation risk in the region across the state," emailed Jeremy Porter, head of climate implications at First Street, a nonprofit in Brooklyn, New York, that provides risk data on climate threats.
Home policies
Despite the price increases, New Hampshire homeowners are faring better than many across the nation.
New Hampshire had an average annual premium of $941 this month for $300,000 in dwelling coverage — 56% below the national average, according to a Bankrate analysis. Only Vermont was lower at $799.
Labor and material costs are driving the higher rates for home insurance.
Steel products cost 65% more in December 2023 than in January 2020. Asphalt shingles were 40% higher, and ready-mix concrete was 29% more, according to a presentation by Robert Hartwig, clinical associate professor of finance and director of the Risk and Uncertainty Management Center at the University of South Carolina.
During that time frame, overall consumer inflation jumped 19% while construction materials skyrocketed 41%, and pay for tradesmen rose 34%.
"It is a very intense form of inflation," Hartwig said. "We can only reflect it in rates with a significant lag and that's exactly what's happening now, so where as inflation has subsided in the broader economy, it is at its peak in the property casualty insurance industry today, at least in terms of passing it through to consumers ...."
At least at this point, higher insurance premiums haven't affected potential homebuyers the way interest rates have.
"At this juncture, we haven't experienced the issue of our borrowers being notably impacted by increased homeowners premiums," said Rob Dapice, executive director of New Hampshire Housing.
"In general, we don't have any indication that homeowner insurance premiums are significantly impacting New Hampshire borrowers and housing affordability. The market is mainly focused on (interest) rates and home values," he said.
Auto rates
New Hampshire vehicle insurance rates jumped 28% in a two-year period ending in 2023, compared with 27% nationally, according to S&P Global Market Intelligence.
The 10 largest underwriters in the U.S. private auto insurance market each raised their premiums by double-digit percentages, compounding substantial hikes in 2022, according to S&P.
Citarella, the state actuary, said today's vehicles contain more technology than in previous decades and cost more to fix.
"People don't want to go back to the Fred-Flinstone-mobile or the Model T," Bettencourt said. "They like the new tech in their car, but it is obviously a price factor."
Hartwig said the average cost to repair a car in a collision hit a record high in early 2023 at $5,423, which was 62% higher than the full year 2019. That number dropped to $4,588 in the third quarter of last year, but was still up nearly 37% from the full year 2019, according to Hartwig.
"What consumers are seeing in rates are reflecting these very high increases in severity (repair costs)," Hartwig said.
Citarella said he doesn't see a decline in auto rates coming in the near future, "unfortunately."
Lee Dowgiewicz, president and CEO of Middlebury, Vermont-based Cooperative Insurance Cos., said rate increases instituted in September are "having no positive effect for the company."
It is probably going to be 2025 or 2026 "before things start to level out," he said at the symposium.
"And when I say level out, I am not saying drop, because I do think when I have this kind of conversation with people, they think, 'Well, the price is going to come down.'
"No, I don't think so," he said.
Reinsurance companies, which share some of the insurance companies' risk, hiked their rates 35% one year and more than 5% last year to insure Dowgiewicz's policies.
"They're not going all of a sudden to soften their costs. They're looking at a new normal," Dowgiewicz said. "There will be a time where it starts to decrease, but we aren't there yet."
Hartwig said the cost of lawsuits, legitimate or frivolous, exacerbate the situation.
"They act as a tax, and it's a tax whose cost has to be passed along, both by the businesses that are having to pay out these large awards and the insurers that oftentimes are the ultimate payer of much of this," Hartwig said.
Flood insurance
While many homeowners policies cover wind damage, most don't cover flooding. That coverage must be purchased separately.
No Granite State community has more flood insurance coverage than Hampton, with 1,936 policies providing a combined $395 million in coverage, according to figures from the National Flood Insurance Program.
Hampton has been hit by three serious rounds of flooding since December, according to Town Manager Jamie Sullivan.
"A number of folks are looking to protect their homes by raising them, folks who have repetitive losses," he said. "We're seeing an increase in the number of requests for permits to raise structures and better protect them from flooding."
Many structures are family-owned and "may not have flood insurance ... at all," he said. "Those folks are having issues with multiple storm losses."
There are about 7,300 flood insurance policies in New Hampshire. More than 90% of the state's communities participate in the flood insurance program, according to Lorna Colquhoun, communications director in the Division of Economic Development at the state Department of Business and Economic Affairs.
Since 1978, New Hampshire residents and businesses have received more than $53 million from flood insurance claims, she said.
Porter said New Hampshire should expect "extreme precipitation events (to) become more intense and frequent over the next few decades."
Rockingham County should expect increased precipitation risk and it "also lies on the most northern end of the region of the country that is seeing increased risk of wind and storm surge damage due to the northern movement of potential tropical cyclone landfalls into the future," Porter wrote.
"The increased damage from tropical cyclones is driven by a combination of warming air temperatures, warming sea surface temperatures, sea level rise; all of which provide more fuel for the storms and make those storms more damaging," he said.
Coos County actually has the highest percentage of properties (around 11%) that could see higher prices for flood insurance.
"These are the number of properties with high risk that have already been tagged for insurance increases in coverage," Porter said.
