The Treasury Department outlines the rising cost of homeowners insurance

The department said the report is “based on the most comprehensive and detailed snapshot of the homeowners insurance market to date,” covering more than 330 insurers and more than 246 million homeowners insurance policies “aggregated down to the zip code level from 2018 to 2022.” , with an annual average of 49.3 million policies.

While insurance costs are rising nationally, significant differences between regions and zip codes showed that average premiums per policy rose 8.7% faster than annual inflation from 2018 to 2022. But some consumers still faced “substantially larger premium increases than the national average,” especially for those estimated to live in areas at greater climate risk.

These communities pay much more because they are susceptible to the effects of “substantial weather events,” the department said.

“From 2018 to 2022, consumers living in the 20% of zip codes with the highest projected annual building losses due to climate-related hazards paid an average of $2,321 in premiums, 82% more than those in the 20% of zip codes with the lowest climate risk. .”

Some reports have shown that the increase in higher premiums has led to higher non-renewal rates, and the report confirms this, saying that consumers living within these higher-risk zip codes “experienced higher non-renewal rates, with an average non-renewal rate of approximately 80 percent. higher than those in the lowest risk zip codes.” This also lends credence to the idea of ​​reduced availability of insurance policies in higher risk areas, the ministry said.

Risks from climate change also make it harder for insurance companies to operate, the report said, due to higher costs in these higher-risk areas.

“The Treasury Department’s analysis comes at a time of devastating tragedy, loss of life and destruction from the wildfires in the Los Angeles area,” Treasury Secretary Janet Yellen said in a statement. “While it is far from clear what the exact financial cost of this disaster will be, it is a stark reminder of the impact of the growing magnitude of natural disasters on the U.S. economy.”

Yellen added that the situation in Los Angeles “does not stand alone as evidence of this impact, with other climate-related events leading to challenges for Americans in finding affordable insurance coverage — from severe storms in the Great Plains to hurricanes in the Southeast.” ”

The risks identified in the report underscore a threat to the “long-term prosperity of American families,” she said.