Rising Homeowners Insurance Premiums Spur State-Level Reforms in California and Florida

Homeowners insurance premiums in the United States are expected to rise by an average of 8% in 2025, contributing to increased financial strain on homebuyers and existing homeowners. This upward trend in insurance costs is also linked to a surge in mortgage delinquencies, impacting affordability and complicating monthly budgeting for insurance and mortgage payments alike. Industry professionals have noted that rising premiums not only affect consumers but also increase operational costs for mortgage servicers, who must engage more in loss mitigation efforts and manage service fees cautiously to avoid exacerbating affordability challenges.

In response to these market pressures, various housing industry stakeholders have mobilized advocacy efforts at the state level, where homeowners insurance regulation primarily occurs. California and Florida have been focal points for reform due to their acute insurance market challenges characterized by high catastrophe exposure and regulatory constraints. California's insurance issues track back to Proposition 103 enacted in 1988, which limited insurers' ability to increase rates to cover growing risks from natural disasters like wildfires. Delays and denials of rate increase requests by the state's Department of Insurance (DOI) have led to carriers withdrawing from the market, limiting homeowners' access to affordable insurance and hampering homeownership.

Advocacy groups such as the California Mortgage Bankers Association (CMBA) have engaged in sustained campaigns to push the DOI toward more flexible regulatory policies. This advocacy culminated in the DOI's adoption of the "Sustainable Insurance Strategy," allowing insurers to use catastrophe modeling for rate setting and streamlining rate increase approvals. Although the strategy has encouraged some carriers to recommit to the California market, opposition from consumer groups resistant to rate increases remains a challenge to full implementation.

Florida has faced similar disruptions caused by insurance carriers exiting the market or becoming insolvent, driven by high exposure to natural disasters and a large volume of insurance claim lawsuits. The Florida Realtors association has been active in advocating for legislative reforms, including the repeal of one-way attorney fees and assignment of benefits provisions, which were significant cost drivers in insurance claims litigation. These reforms have attracted new private insurers, improving market stability despite Florida's ongoing risk as a major hurricane zone.

While these state-level reforms signify progress, insurance experts emphasize the need for balanced solutions that consider the interests of both policyholders and insurance carriers. Achieving low insurance rates for consumers while ensuring carriers maintain financial stability remains a complex challenge. Continued legislative momentum and innovation in risk management practices are viewed as essential for fostering sustainable homeowners insurance markets. Industry insiders expect further regulatory adjustments in the near future as states seek to balance market viability with consumer protection.

Overall, the rising homeowners insurance premiums reflect broader market and regulatory dynamics influenced by natural disaster risks, litigation environments, and state-level insurance policy frameworks. Housing industry and insurance professionals continue to monitor these developments closely given their significant implications for mortgage markets, affordability, and homeownership rates across the United States.