Senate hearing: witnesses say U.S. homeowners insurance market is under strain as premiums rise and carriers pull back

At a Senate Banking, Housing and Urban Affairs Committee hearing, witnesses and local officials said the U.S. homeowners insurance market is under sustained stress that is reducing availability of coverage and raising premiums for many families.

The warning came from industry and policy witnesses who cited a mix of factors driving higher costs: record inflation and sharply higher building-material prices, a decade of rising catastrophe losses, litigation and fraud costs, constrained insurer capital, state regulatory limits on pricing and uncertainty from federal trade and program decisions.

Why it matters: Committee members and witnesses said higher premiums and nonrenewals threaten access to mortgages and long-term housing affordability in some regions, and can create localized financial instability for homeowners and local governments.

Industry trade group representative Robert Gordon, senior vice president at the American Property Casualty Insurance Association, said insurers are still trying to recover capital lost in recent years. "Homeowners insurers in 2023 ... paid out a dollar and 11¢ in claims and expenses for every dollar collected," Gordon said, explaining that underwriting has been unprofitable overall and that insurers have limited capacity to keep writing high-risk business without adequate rates or capital.

Ranking Member Elizabeth Warren told the committee that rising premiums are already pricing some families out of homeownership: "For families across the country, insurance markets and insurance is not just a financial product. It's peace of mind," she said, adding that many areas are seeing double-digit increases in recent years.

Witnesses and senators described a set of common drivers:

- Inflation and building costs: Speakers repeatedly tied a large share of premium increases to the post-pandemic surge in construction and material prices. Gordon and other witnesses noted a multi-year inflationary effect on replacement costs that feeds higher insurance claims and premiums.

- Natural-catastrophe and exposure changes: Insurers and researchers said catastrophe losses have risen over the past decade, increasing the cost of replacing damaged property in floods, hurricanes, wildfires and severe convective storms.

- Legal and fraud costs: Industry witnesses pointed to litigation and assignment-of-benefits fraud as contributors to higher claims costs and higher premiums in affected states.

- Regulatory constraints and market structure: Witnesses singled out states with prior-approval rate regimes as having larger availability problems; Robert Gordon described California as facing "the worst property insurance crisis," including a slow prior-approval process that he and others said discouraged insurers from sustaining coverage in high-risk areas.

- Trade and federal policy uncertainty: Senators and witnesses said recent tariff announcements and federal policy changes (including proposed cuts to FEMA programs) have added uncertainty that can raise rebuilding costs and affect premium-setting.

Policy responses discussed at the hearing included federal mitigation grants, expanded use of evidence-based building and retrofit standards, state regulatory reforms to allow actuarially based rates, targeted legal reforms to limit certain litigation abuses, and greater investment in verified mitigation programs that insurers recognize when pricing risk.

Michael Newman, general counsel for the Insurance Institute for Business and Home Safety, emphasized mitigation tied to verification: "Our primary goal should be to make American homes and communities more survivable and insurable," he said, describing IBHS programs such as Fortified and Wildfire Prepared as examples insurers can use to differentiate risk.

Not every witness placed equal weight on each driver. Alex Epstein of the Center for Industrial Progress argued that market signals and resilience measures, rather than expanded federal spending, should be the primary policy lever. He urged freer insurance pricing to send signals about risk, saying, "In a free market, fire insurance premiums would have risen dramatically in response..." (Epstein testimony).

The committee also discussed legislative and administrative actions. Witnesses and senators urged a long-term reauthorization of the National Flood Insurance Program and expressed concern about proposed eliminations or cuts to hazard-mitigation grant programs administered by FEMA. Several senators said they and colleagues are preparing or supporting bills to address aspects of the market and mitigation funding.

The hearing reflected broad agreement among witnesses that mitigation and verified resilience actions can reduce losses and improve insurability, while the appropriate mix of regulatory, legal and federal funding responses remained the subject of partisan differences.

Looking ahead, committee members asked witnesses for written follow-up on data and policy prescriptions; the chair set a deadline for questions for the record and for witness responses.