2025 – Study Shows Home Insurance Market Stabilizing

According to a new report from Matic, the homeowner’s insurance market has shown signs of stabilizing roughly two years after major premium hikes and coverage challenges. 

Even though premiums are high, trends in the insurance industry show that a slowdown in premium growth may be coming. Here is a brief overview of the report and what it could mean for homeowners and insurance companies in 2025.

Challenges still exist but premium increases slow 

This year started with record setting premium increases with new policy premiums going up 17.4% on average. Homeowner’s who purchased a policy in 2021 saw their renewal premium in 2024 skyrocket an average of 69% which averaged out to an $865 annual increase.

By mid-year, the premium rate increase started to slow with the average increase dropping from 10.7% to 6.6% in the second half of the year. 

“We’re seeing signs of improvement in the home insurance market, driven by a few key factors,” said Ben Madick, CEO and co-founder of Matic in a recent Insurance News Net article. “Inflation has started to slow, easing the pressure on repair and claims expenses. On top of that, many carriers received long-awaited approvals for rate increases, which has helped them align premiums with current costs and return to profitability.”

Forecasting for 2025 finds that while premiums are expected to continue heading up, the increases will be smaller as insurers are benefiting from easing inflation. Unfortunately, severe weather events could end up pushing costs higher, particularly in states that are at risk of severe weather. 

Insurers reentering some markets

Homeowners in certain high-risk areas of the country may have found it difficult to secure coverage as many insurers pulled out of specific regions or tightened their underwriting criteria, making it harder to qualify for coverage. 

Luckily, by the middle of the year, most major insurance companies had returned to profitability and reentered several of the markets they had pulled out of earlier in the year. The availability of quotes had increased by 60% in November when compared to March. The Excess and Surplus (E&S) market also helped out by providing coverage options in areas where traditional carriers had abandoned. While progress has been made, there are regulatory issues in states like California and New Jersey that could impact the stability of the market in 2025. 

 Climate change is impacting the insurance industry

Climate change is still a major factor for homeowner insurance companies. A slow hurricane season start eventually led to Hurricane Helene and Milton which resulted in an estimated $55 billion in losses. As wind and hail claims have increased in recent years, some insurers have responded by modifying their policies to move roof damage from replacement cost to actual cash value to helps save money. 

More severe storms are pushing flood risks beyond areas on the coast. Hurricane Helene caused massive flooding damage in western North Carolina which points to the need for increased flood insurance education in areas that are considered low risk for flooding.  

Housing market and mortgage industry impacted

While the Federal Reserve recently cut interest rates, mortgage rates have stayed above 6% as of November 2024, leading to affordability issues for potential homebuyers. The Mortgage Bankers Association is forecasting a 28% increase in 2025 for mortgage originations, but the cost of insurance may push household budgets. 

Higher insurance premiums can also impact mortgage qualifications. According to the report, 63% of lenders reported challenges when they tried to secure homeowner’s insurance for borrowers. Fannie Mae and Freddie Mac temporarily eased up on enforcement of insurance requirements in response to higher insurance rates. 

Experts are cautiously optimistic 

According to the report, 2025 may bring some stabilization to the homeowners insurance market. Inflation is slowing and carriers are re-entering markets they pulled out of which should help stabilize the market. While optimistic, the report also cautions that the homeowners insurance industry is still vulnerable to severe weather as well as regulatory issues that can crop up at the state level, both of which will push premiums higher.