Source: Keys and Mulder, National Bureau of Economic Research (2024)
Note: State average is shown in counties with few or no observations.
Enid, Okla., surrounded by farms about 90 minutes north of Oklahoma City, has an unwelcome distinction: Home insurance is more expensive, relative to home values, than almost anywhere else in the country.
Enid is hardly the American community that is most vulnerable to damaging weather. Yet as a share of home prices, insurance costs more in parts of Enid than in New Orleans, much of which is below sea level. More than in Paradise, Calif., which was destroyed by the Camp fire in 2018. More than in the Florida Keys, which are frequently wracked by hurricanes. Even more than in the Outer Banks of North Carolina, where houses have begun slipping into the rising sea.
Enid’s plight reveals an odd distortion in America’s system of pricing home insurance. As a warming planet delivers increasingly damaging weather, the cost of home insurance has jumped drastically. But companies are charging some people, especially in the middle of the country and parts of the southeast, far more than other homeowners with similar levels of risk, an examination by The New York Times has shown.
Industry experts offer several reasons for the disparities, including the fact rural states have fewer homeowners to share risk, and states have varying rates of insurance fraud, which can drive up premiums.
But new research points to a striking pattern: Higher premiums are being charged in states where regulators apply less scrutiny to requests for rate increases, compared with states where officials question the justifications offered by companies and try to keep rates low, the data show.
The analysis is based on new data that make it possible for the first time to see what households pay for home insurance by county and ZIP code, across the United States. The average premium jumped 33 percent between 2020 and 2023, far more than the rate of inflation, the data show. But in some places, homeowners are paying more than twice as much for insurance, as a share of home value, than people who live elsewhere and face similar exposure to severe weather.
Sources: Keys and Mulder, National Bureau of Economic Research (2024); Zillow; FEMA; First Street Foundation.
Note: “Average premium as a share of home value” compares median home insurance premium in 2023 to Zillow’s typical home value estimate in each county. State average shown in counties with few or no observations.
As a result, America’s home insurance market is increasingly distorted, said Ishita Sen, a professor of finance at Harvard Business School who studies why insurance rates diverge from risk.
In communities where insurance rates exceed the actual risk, home ownership can be unaffordable. And in places where insurance prices are too low, it encourages people to move into homes in areas likely to be hit by wildfires or other disasters that could deliver financial ruin, Dr. Sen said.
The market is “incentivizing all sorts of crazy behavior,” she said.
Getting a detailed look at the cost of insurance in different parts of the United States has been almost impossible until now because private insurers don’t publicly disclose what they charge. But two researchers, Benjamin Keys, a professor of real estate at the University of Pennsylvania’s Wharton School, and Philip Mulder, a professor at the University of Wisconsin School of Business, found a workaround.
Homeowners often pay their insurance premiums together with their mortgage and property tax, through an escrow account. They make a single payment every month to a mortgage service company, which then pays the mortgage lender, the local government and the insurance company. The system is designed to ensure homeowners never miss a payment.
Working with CoreLogic, a property information and analytics company that obtains data from mortgage servicers, the researchers obtained data for about 12.4 million of the nation’s roughly 80 million owner-occupied households. That data showed how much those households paid in escrow annually from 2014 through 2023. After deducting payments for mortgages, property tax and other fees, they could estimate what each household paid for property insurance.
Source: Keys and Mulder, National Bureau of Economic Research (2024)
Note: Inflation-adjusted. Each line depicts the median of all loan observations within a risk group.
There is certainly a relationship between climate risk and what insurance companies charge for coverage in case of damage from extreme weather. But all kinds of other factors get in the way, causing a misalignment between risk and premiums.
In McCurtain County, Okla., for example, the typical homeowner paid an average of $2,837 for insurance. But in the same area with the same weather just across the state line, the average homeowner in Little River County, Ark., paid $1,673.
The cost of insurance is often higher for large, expensive homes because they cost more to replace. To get more accurate comparisons, Dr. Keys and Dr. Mulder looked at insurance costs as a share of the typical local home value.
Across the more than 9,000 ZIP codes for which data was available, the typical American household last year paid about $500 in home insurance premiums for every $100,000 of home value, or 0.5 percent, the professors found.
But in California, which suffered through more than 7,000 wildfires last year, the typical homeowner in many ZIP codes paid premiums as low as .05 percent of home value. By contrast, in parts of Alabama, Oklahoma, Louisiana and Texas, the average homeowner faced home insurance premiums greater than 2 percent of the value of local homes.
“Families with the same level of risk exposure pay wildly different amounts to protect themselves from harm,” Dr. Keys said. “Different prices for the same risk feels unfair.”
A visitor to Enid, population 50,000, would not recognize it as the riskiest spot in America to own a house. At the center of town is the Garfield County Courthouse, a handsome Art Deco structure built during the Great Depression, surrounded by a wide and inviting lawn. The square is ringed by storefronts offering cannabis, legal services and $500 cowboy boots.
The federal government designates Garfield County, which includes Enid and sometimes suffers hail storms and tornadoes, as having a “relatively low” level of risk. Yet the typical Enid homeowner spent $2,113 on home insurance last year, according to the researchers. That was 3.5 percent of the average home value of about $60,000 — more than six times the national average.
That high cost is taking its toll.
In 2019, Kelsey Keyworth bought her first house, a handsome pale-gray bungalow with a wood deck and white trim. She hoped to stay in the house until her son, who is now 13, finished high school. But despite never filing an insurance claim, her premiums jumped by 42 percent over three years. Ms. Keyworth, the membership director at Enid’s YMCA, decided to sell and move with her son into a rental home.
“It’s kind of heartbreaking,” Ms. Keyworth said on a recent afternoon at a coffee shop in Enid. “You’re like, gosh, I tried so hard to get here.”
Torrie Vann, the real estate agent who sold Ms. Keyworth’s house, said that since February, other clients had sold their homes because of rising insurance premiums. “They’re having to sell and buy something smaller,” she said.
Kelsey Keyworth in Champlin Park in Enid.
Megann Johnson, agent and owner of Great Plains Insurance.
Home buyers, meanwhile, are reacting to rising premiums in Enid by settling for smaller houses than they planned, according to Jeff Shaffer, another Realtor in town. “People are having to buy down,” he said. “There’s a lot of sticker shock.”
Oklahoma is the sixth-most expensive state for home insurance. (The top five are Florida, New York, Louisiana, Colorado and Hawaii.) But measured as a share of home value, Oklahoma ranks third, behind Louisiana and Mississippi.
Along the edges of Oklahoma, the premium paid by the typical household last year was as much as 70 percent higher than in adjacent counties in Texas, Arkansas and Kansas — despite those counties having similar levels of exposure to disasters, according to federal data.
Megann Johnson is an insurance agent in Enid whose own home insurance premiums almost doubled, to $4,860 this year from $2,570 in 2021. She says her aunts, who sell insurance in nearby Kansas, tease her about what they call Oklahoma’s “stupid” high rates. “Our risk is the same, right?” Ms. Johnson said. “We’re 50 miles from the state line.”
Glen W. Mulready, Oklahoma’s elected insurance commissioner, has never exercised his power to deny a rate increase requested by an insurance company for home insurance. He said he believed that competition, not regulation, was the best way to hold down prices.
But that could be one important reason why Oklahoma homeowners with relatively low risk are paying high premiums, according to Dr. Sen.
In states where officials tightly control what insurance companies can charge, premiums tend to be priced below what they would be if they reflected the true likelihood of damage from storms, fires or other catastrophes, she and her co-authors found.
Source: Keys and Mulder, National Bureau of Economic Research (2024)
Note: “High regulation” and “lower regulation” categories from Oh, Sen and Tenekedjieva, Harvard Business School working paper (2022).
And Dr. Sen and her colleagues discovered something else.
After big losses in those tightly regulated states, such as California, national insurers tend to raise rates in more loosely regulated states. In other words, homeowners in states with weaker rules may be overpaying for insurance, effectively subsidizing homeowners in states with tougher rules, she said.
If California makes it especially hard for insurers to increase premiums, Oklahoma makes it much easier.
Mr. Mulready defended his approach, saying it’s not his role to stop private insurance companies from raising rates in Oklahoma.
“We allow the competitive free market to work,” he said in an interview. If national companies raised rates in Oklahoma to make up losses in states like California, they would lose business to local insurers, Mr. Mulready said.
But Dr. Sen said her research suggests the home insurance market is far less competitive than it might seem. After choosing an insurer, people often stick with that same company, even if their premiums go up, she said.
Three insurers — State Farm, Farmers, and Allstate — collectively wrote more than half of all home insurance in Oklahoma last year. A spokesman for Allstate, Michael Passman, said in a statement that “we do not raise rates in one state to offset losses in another.” State Farm and Farmers did not respond to questions. Allstate is publicly traded; State Farm and Farmers are not. (Farmers’ parent company, Zurich Insurance Group, is traded on the Swiss exchange.)
Allstate and State Farm reported a profit in their life insurance divisions last year but losses in property and casualty insurance left them in the red companywide, according to AM Best, a company that rates the financial strength of insurers. Farmers also lost money in its property and casualty insurance operations, which include home insurance, but it’s not clear if its overall business turned a profit.
There are some other possible explanations for why insurance companies charge wildly different rates in places facing similar threats.
Insurance can be more expensive in smaller, more rural states, where there are fewer households to share the risk, said Karen Collins, a vice president at the American Property Casualty Insurance Association, which represents insurance companies. Some states require higher minimum levels of coverage, which makes policies more expensive. And fraudulent claims, which end up increasing premium costs, can be more prevalent in some locations than others, she said.
Reinsurance is another reason. The price of reinsurance (effectively, insurance purchased by insurance companies to make sure they can cover losses) has spiked in recent years. Companies buy different amounts in different parts of the country and pass those costs onto homeowners.
A fourth factor is whether a state has a government-mandated, high-risk pool of insurance, designed for homeowners who cannot find private coverage. Research suggests those pools, which are available in about two-thirds of states, can lower private insurance premiums. Oklahoma has no such risk pool, though creating one would “certainly pull down rates,” Mr. Mulready said. The question for lawmakers, he added, is “whether that’s the role of government.”
Explaining the distortions in the insurance market is perhaps easier than fixing them.
United Policyholders, a nonprofit group that advocates for consumers, said the fact that some households pay more for insurance than others, despite having the same level of risk, underlined the need for regulators to demand more transparency about how insurers set rates.
That discrepancy in rates “is certainly not fair,” said Emily Rogan, a senior program officer at United Policyholders. She said customers need to know what data insurers collect on them, so that they have the opportunity to contest information that may be inaccurate.
Forrest Bennett is an insurance agent in Oklahoma City and a Democratic state lawmaker. He said the challenge his state faced was how to protect the average homeowner from high premiums without causing insurers to flee because they can’t turn a profit, as has happened in California.
Mr. Bennett praised a new state program that gives homeowners money to install hail-resistant roofs, which he hopes will lower premiums. But he said enacting broader reforms to address the cost of disasters “requires people to accept that climate change is real.”
The rising cost of home insurance is “where climate change meets the average American’s pocketbook,” Mr. Bennett said. “We are trending toward a place where it’s not sustainable.”
Covington, Okla., just south of Enid. Oklahoma is one of the most expensive states for home insurance.
Last fall, the Senate Budget Committee began investigating rising insurance rates and how underwriters are responding to the growing dangers of extreme weather.
“Climate havoc” is pushing up insurance costs and risks upending “housing markets, mortgage markets, and local property tax bases, and spilling out into the broader economy,” Senator Sheldon Whitehouse, Democrat of Rhode Island and the committee’s chairman, said at a hearing on the issue in June. He warned that climate change threatens the stability of the insurance market and, by extension, the economy, in a way that “sounds eerily reminiscent of the run-up to the mortgage meltdown of 2008.”
And even in places where insurance costs remain relatively flat, the disconnect between premiums and actual risk is cause for concern, Dr. Keys said. As climate change gets worse, those insurance costs will eventually rise, and possibly quickly, he said — hurting home values, shocking some homeowners and destabilizing real estate.
“I personally think we’re in a lot of trouble,” Dr. Keys said. “This should be ringing alarm bells for housing markets all over the country.”
Edited by Lyndsey Layton and Douglas Alteen
Additional visual editing: Claire O’Neill and Matt McCann
Methodology
Home insurance cost map: Keys and Mulder calculated annual homeowners insurance costs by separating mortgage and tax payments from loan-level escrow data obtained from CoreLogic. Households whose payments were captured by CoreLogic were not necessarily present in all years of data from 2014 to 2023.
Climate risk map vs. insurance costs as a share of home value map: Risk percentiles are based on a combination of FEMA’s National Risk Index expected annual loss rates per dollar of building value for hail, heat and cold waves, ice storms, lightning, strong winds, tornadoes, volcanic activity and winter weather. Wildfire and hurricane risk data came from First Street Foundation, which separates flood risk out of their hurricane risk score. Flooding is typically covered by the National Flood Insurance Program and less likely to be reflected in the escrow-based data.
State regulation charts: Risk scores use the composite FEMA and First Street Foundation risk scores. Categorization of “high regulation” and “low regulation” states come from analysis of requested and approved rate filings from Oh, Sen and Tenekedjieva (2022), where “lower regulation” includes both low and medium friction states. Regulation analysis was conducted on rate filing requests from 2009 to 2019. The charts use a loess regression to visualize the overall trend.
“High regulation” states include California, Connecticut, Hawaii, Illinois, Indiana, Minnesota, Missouri, North Carolina, North Dakota, New Jersey, Nevada, Ohio, South Dakota, Texas, Utah, Wisconsin and Wyoming.
