5 Signs We’re Approaching an Insurance Affordability Crisis

In some parts of the United States, homeowners insurance premiums have doubled in the last five years.

Some states are reporting 20% year-over-year increases in premiums. In other states, insurers are pulling out entirely because they can’t raise prices enough to accommodate risk.

Some experts are calling it a “crisis.” Today, we’re exploring five signs we may be approaching an insurance affordability crisis.

1) More Homeowners Are Relying on FAIR Plans & “Insurers of Last Resort”

Many states have established “Fair Access to Insurance Requirements” (FAIR) plans. Florida, for example, has Citizens Property Insurance Corp.

These plans give residents the ability to access insurance when they’re unable to buy a policy from the open market.

If your property is too risky to insure, for example, then you might have no choice but to use your state’s FAIR plan.

According to Harvard’s Joint Center for Housing Studies, more homeowners are relying on FAIR plans to access insurance.

Homeowners in California, Florida, Louisiana, Massachusetts, and North Carolina are joining FAIR plans at higher numbers. Florida ($1 trillion exposure) and California ($313 billion exposure) have the highest exposures in the country, stressing the system and transferring risk to state residents.

As Harvard explains, governments “generally want to depopulate these programs” to limit financial exposure. California, for example, may assign a $1 billion surcharge on state residents to cover its FAIR system after losses incurred from the January 2025 Los Angeles fires.

2) Homeowners Insurance & Home Prices Are Both at Record Highs

Homeowners insurance and mortgage payments are two of the biggest costs of owning a home. Both of these payments are nearing record highs – even when accounting for inflation.

As Harvard explains, we’re facing “dual affordability stressors” because of rising home prices and homeowners insurance costs.

In 2008, the average homeowners insurance premium was $1,141 per year. In 2024, it’s around $1,984 per year.

Meanwhile, the Case-Shiller US National Home Price Index has risen from a low of 141 in 2012 to a high of 320 today. That index tracks the average cost of a single-family home in 20 markets nationwide.

Eventually, critics argue, something has to break; we can’t keep paying record mortgage payments and record insurance payments at the same time.

3) Insurers Continue to Request Double-Digit Price Increases

State Farm made headlines for requesting a 30% rate hike in California after the January 2025 Los Angeles wildfires.

The state later authorized a much lower request of 17%. After the ruling, State Farm asked for another rate hike, arguing it needed to raise rates 30%, on average, across California to accommodate risk.

State Farm isn’t the only company raising premiums or requesting to raise premiums. North Carolina car insurance companies recently requested a 22.6% statewide increase in premiums, for example. Other states, meanwhile, have faced a 50% rise in insurance premiums in recent years.

As Matic explains, home insurance premiums are “surging” as insurers navigate a turbulent marketplace. Insurers are finding it increasingly difficult to manage risks. When they’re unable to manage risks, they raise rates to accommodate this uncertainty. All of that adds up to higher premiums for policyholders.

4) Insurers Are Increasingly Leaving Multiple States

Insurers need to raise rates to accommodate risk. If they’re unable to raise rates, they can either:

• Do business at a loss
• Cancel policies, fail to renew policies, or leave states entirely

Many insurers are choosing the latter option. State Farm made headlines in 2024 for cancelling tens of thousands of policies across California, for example. Many of those policies were later affected by the January 2025 wildfires.

American National, meanwhile, recently announced plans to completely exit 9 states because of inflationary pressure and risk uncertainty.

Allstate and Farmers have also made headlines for withdrawing from certain states.

When insurers withdraw from states, it gives residents fewer options. In many cases, residents are forced to rely on their state’s FAIR plan, transferring risk to the state’s residents.

5) FEMA’s NFIP is Reporting Lower Flood Insurance Uptake & Could Face Insolvency Issues

FEMA’s National Flood Insurance Program (NFIP) aims to balance affordability and risk while protecting homeowners in flood-prone regions across the United States.

If you have flood insurance, it probably comes from the NFIP.

The NFIP, however, has reported low uptake among homeowners in flood-prone areas in recent years. In 2009, the NFIP wrote 5.4 million policies nationwide. By 2023, that number had steadily declined to 4.5 million policies.

The NFIP itself has faced bankruptcy issues. In fact, as Harvard explains, those insolvencies were only averted through Congressional action: they were authorized to take on additional debt from the US Treasury while also having tens of billions of dollars of debt cancelled.

All of this adds up to a worrying conclusion: the NFIP could be forced to cap disaster assistance payments or limit future insurance purchases, making it harder to buy flood insurance even as coastal flooding rates are expected to rise.

What Breaks First?

Homeowners can only absorb so much pain. With mortgage rates, home prices, and insurance premiums at record highs, something has to give.

Fortunately, there are signs we could be on the other side of an insurance crisis. In 2025, Florida’s Citizens Property Insurance Corp., the insurer of last resort for Florida homeowners, announced plans to cut rates by 5.6%. Citizens also reported a 20% drop in policyholders year-over-year, indicating many Florida homeowners had found options on the open market.

Stephanie Corona

Stephanie is a property insurance claim expert with over 20 years of experience working as an insurance adjuster, expert witness, appraiser and umpire. She is passionate about sharing her expertise, knowledge, tips and training to help both property owners and Public Adjusters in their pursuit of effectively managing claims and recovering the claim settlement they deserve after a loss.