Why Insurance Rates Are Rising and Policies Are Being Non-Renewed
Every day we get calls at our office about rate increases on all types of insurance. With the increased cost of construction on homes, the auto market still in flux from COVID, inflation, and a variety of other factors, many of the stories we hear involve large increases that can feel perplexing to clients.
One of the more recent and concerning trends is policy non-renewals—when an insurance company decides not to continue insuring a policy after the current term expires. The goal of this article is to explain what’s happening so you can better understand why these trends are occurring and how to prepare for the future.
The Big Boys
If you have ever watched a sporting event, concert, or major broadcast, you have likely seen advertisements from large national insurance companies like State Farm, Allstate, Geico, USAA, or Progressive. Their brands and marketability are extremely important to them, and because of that, they do everything they can to limit risk and exposure.
Many of these companies avoid insuring higher-risk properties, such as homes located along coastal areas. Looking back at events like Hurricane Katrina, where companies like State Farm faced significant lawsuits over claims handling, and Hurricane Sandy, where lawmakers required changes to how deductibles were applied, it’s clear these situations represent major financial risks.
As a result, these companies tend to focus on lower-risk opportunities and more consistent profitability. It is unlikely we will see a major shift in their appetite for high-risk markets anytime soon. So what other options are available?
Regional and Risk-Specific Companies
Many homeowners—especially in coastal areas—are turning to smaller companies that focus on specific states or regions. These companies operate very differently from the larger national carriers.
Large insurers typically cover a wide range of risks, from auto to home to life insurance, and can balance losses across different lines of business. Regional companies, however, often start with a pool of investors and may only retain a portion of the total risk they insure.
For example, a company insuring $100 million in homes may only hold 20% of that risk. The remaining portion is transferred through reinsurance, where other investors take on that exposure. You may see one company listed on your policy, but a large percentage of the actual risk could be backed by investors elsewhere.
For consumers, this can mean access to coverage that might otherwise be unavailable, often with more flexible options. However, it can also introduce more volatility. Reinsurance contracts typically last 2–5 years, and if costs increase significantly, those changes can impact rates or lead to non-renewals.
In some cases, insurers may need larger rate increases to remain stable, but state Departments of Insurance may limit how much rates can rise at once. When that happens, companies may choose to non-renew policies that no longer fit their risk profile—even if there have been no prior claims.
Florida Is Impacting the Market
Insurance companies aim to remain profitable, and Florida has become a particularly challenging market. While hurricanes are often the focus, insurers have long used models to anticipate storm-related losses.
What has been more difficult to predict is the volume of litigation. Increased legal activity has led to higher losses, which in turn drives up reinsurance costs. Those increased costs don’t stay isolated—they can affect pricing in other states as well.
Even if a company is performing well in one area, it may still need to adjust rates to remain stable overall. At the same time, regulatory limits on rate increases can create additional pressure, sometimes leading to non-renewals instead.
Where Are We Now?
Many areas—particularly coastal regions—are experiencing notable rate increases, and in some cases, policy non-renewals. While conditions may improve over time, the current environment requires a more proactive approach.
It is important to review your policy carefully and make sure your coverage reflects today’s costs, especially with rising construction expenses. While premiums have increased compared to years past, there are still opportunities to find coverage that fits your needs.
Although the days of very low premiums may be behind us, options are still available with the right strategy and guidance.
