Rates

Steeper insurance costs compound housing unaffordability and make it harder for families to make ends meet with the steadily rising cost of living. Rising insurance premiums are responsible for higher credit card debt, higher credit card default rates, and higher mortgage delinquency rates.

Insurance price hikes can be opaque and overwhelming for homeowners—with insurers often providing little explanation and few avenues for recourse. The rate-setting process is complex, largely hidden from public view, and is not always fair. In states that require government approval for insurance rate increases, state insurance commissioners are the decision-makers when it comes to allowing annual price changes requested by insurers, though some commissioners have more authority, capabilities, and inclination to deny steep increases than others.

There is generally a multi-step process for home insurance rate-setting. 

• First, insurers establish and submit to the regulators a proposed statewide baseline rate and a set of factors that define how the insurer will adjust that rate for certain groups of customers, properties, or areas based on historical losses. 
• Second, in the 15 states that require prior approval by the state, insurance commissioners review and either approve or disapprove the rate increase (in other words, how much bills will go up on average statewide) or ask the insurer to modify its request. In some states, there is an opportunity for homeowners and advocates to engage in the rate approval process. Unfortunately, in 35 states, the District of Columbia, and Puerto Rico, insurers are not required to gain approval from the insurance commissioner before increasing rates.
• Finally, insurance companies calculate individual premiums they charge individual homeowners based on the statewide baseline rate and coverage amount for the specific policy, combined with factors specific to the property and policyholder. 

All states should strengthen their regulatory oversight over property insurance rate-setting and calculation of premiums to prevent insurance companies from imposing unfair or discriminatory price hikes on families. To do so, states should pass laws to require prior approval of insurers’ rate filings by the insurance commissioner and provide meaningful public participation for people and advocates. Even insurance commissioners with the ability to negotiate and approve rate increases do not always diligently exercise this authority. Insurance commissioners should use all tools available to them to cut down on unfair or discriminatory pricing.