The exodus of insurers from states that have been heavily affected by catastrophic climate-related events is presenting both opportunities and challenges for the carriers that remain, according to the J.D. Power 2023 U.S. Home Insurance Study. Homeowners and renters have been receiving notifications from their insurance providers that they are being dropped, as a result of the strain on property and casualty insurance business models caused by rising costs, regulatory pressures, and the increase in frequency and intensity of natural disasters in states such as California, Louisiana, and Florida.
The high costs and complications of doing business in these areas have led some insurers to stop writing new policies in the hardest-hit states, while others have pulled out completely and issued nonrenewal notices to existing customers. Smaller insurers have become insolvent due to mounting losses from property claims. Additionally, regulations in states like California and Florida, which require approval from the state’s insurance commission to raise rates, have contributed to insurers leaving these states, leaving consumers with fewer options.
Another factor that is less discussed is the ban or limitation on the use of credit scores to determine insurance rates in some states. This creates an additional barrier for insurers in accurately assessing risk and setting premiums.
This exodus of insurers has created challenges and opportunities for agents. Captive agents in states where they can no longer sell homeowners or renters policies are at risk of losing their relationships with existing customers, especially those who bundle their policies. Independent agents have more flexibility in shopping around for their customers but still need to address the negative experiences of customers who have been dropped.
The exit of insurers is also likely to have an impact on customer trust and perception of insurance companies, not only in the affected states but across the country. Media coverage of insurers leaving states has increased, which could have a lasting effect on consumers due to the reputation of these well-known brands.
However, for agents who work with carriers that are staying in affected states, there is potential to bring in new business. Although these prospective customers may live in higher-risk areas, they could still be valuable assets to the agent’s book of business.
The survey also revealed other key findings, such as the flat overall satisfaction with homeowners’ insurance, which has seen an increase in rates. Insurers that absorb new customers in states where other carriers have exited may struggle to build trust and customer satisfaction immediately. Customer satisfaction is highest among those with a tenure of 8 years or more, and price sensitivity drives shopping and limits bundling.
To enhance customer satisfaction, agents can provide transparency by explaining rate increases, review current policies and coverage options, and help customers fully understand their insurance policies.
In terms of insurer rankings, Erie Insurance ranks highest in the homeowners’ insurance segment, followed by Amica and Auto-Owners Insurance. Erie Insurance also ranks highest in the renters’ insurance segment, followed by American Family and Lemonade.
Overall, the exodus of insurers from heavily affected states presents challenges for both agents and customers, but also opportunities for those carriers that remain. Agents should focus on enhancing customer satisfaction and trust to navigate these changes effectively.