The New York personal lines insurance market, like others across the US, has been experiencing a hard market beginning in 2022 and continuing through 2025. A hard insurance market refers to a period when insurance premiums rise, underwriting standards tighten, and it becomes more difficult for buyers to obtain insurance coverage. The two hardest-hit policies are normally Home and Auto Insurance.
Auto Insurance
A rise in claims has played a major factor in the hard market. One contributing factor is that New York is a no-fault state, which means insurance companies must pay claims regardless of fault. This drives up the cost of claims. In addition to personal injury, another factor is the cost of vehicles and repairs. These costs have continued to rise since 2020, when the car market had very little supply but a large demand.
Another contributing factor is Social Inflation. Social Inflation is defined as increased awards by juries for numerous reasons, including distrust of insurance companies or “deep pockets” or just a generational thing that continues to cause insurance company executives many sleepless nights. Claim payments and settlements have increased drastically in the past few years.
In addition, there has been an increase in fraudulent auto claims. NY tops the list with fraudulent personal injury protection and bodily injury claims. This is often a result of a staged rear-end accident; drivers will cut you off and then stop short. Scammers will often pack the car to increase the payout for bodily injury. With the help of attorneys and doctors, it has become a full-time job. Unfortunately, the insurance carriers are better off making a smaller payout rather than spending money on costly attorney fees and court costs. Insurance fraud affects us all, the insurance carriers will pass those payouts onto the policyholder. Installing a dashcam could save you thousands in surcharges if it ever happens to you.
When an insurance carrier provides you with a rate, all these factors must be taken into consideration.
We have seen many families become almost uninsurable, leaving them with only one option, and that is to purchase insurance through the New York State Assigned Risk Plan. Since Auto Insurance is required in the state, there must be a last resort for consumers who cannot find insurance in the voluntary market. Rates are substantially higher, coverages are lower, and once you are in, it’s very difficult to ever get out of.
Insurance carriers are also taking a large underwriting stance on unlisted household operators. This refers to newly licensed teen drivers who are not listed on the auto insurance policy. Most parents know their rate will increase if they add a teen, so they don’t. If the teen ended up getting into an accident, the insurance company used to pay, and then the insurance company would add them at that point. Those days are gone. The cost to add a teen driver could be several thousand dollars, but we have seen the insurance company deny benefits if there is an accident with an unlisted driver, so it must be done.
There has also been a big change in which cars an insurance carrier is willing to insure. This past year, we saw Hyundais and Kias being excluded from new insurance policies due to the relative ease in which thieves were able to steal these cars.
2025 Forecast: I would expect to continue to see large rate increases—15-35%—along with carriers continuing to non-renew and drop out of the New York market. The defensive driving course, which is offered online, is a great way to help reduce some of your insurance costs. This will usually save each driver about 10% off the Liability premiums.
Home Insurance
Although it has been relatively quiet in the Northeast with hurricanes and other natural disasters the past two years, the increase in the replacement value of homes, coupled with inflation, increased reinsurance costs, and insurance companies pulling out of the marketplace, have caused a collapse of the New York home insurance market. Many brokers are saying this is the worst it has been in the last 15-20 years.
Because of reasons above, several insurance companies have either become insolvent or have exited the marketplace. This has placed a large burden on other insurance carriers having to take up more market share than they are financially willing to absorb.
New York has one of the hottest real estate markets, with starter homes going for $550k and up. Houses are being built bigger, nicer, and occasionally near water, resulting in increased replacement value of the homes. Together with the cost of contractor’s insurance and labor and materials, all of which have nearly doubled over the last four years, insurance carriers need the backing of reinsurance carriers, which drives up the cost of insurance. Reinsurance carriers are insurance companies for insurance companies. Insurance carriers must take this into consideration when rating a property, and to be profitable, they must charge a much higher rate to account for losses.
Insurance carriers have also tightened up their guidelines in reference to prior water damage claims, condition of the property, and a client’s insurance score. All these factors play a major role in an owner’s insurability.
One of the biggest issues we have seen is with post-purchase insurance inspections. The condition of roofs has been one of the largest and most expensive issues that homeowners are facing. Our advice many times to clients is to stay with their current carrier and try to amend policy limits, coverages, and deductibles. Increasing policy deductibles is a good way to help reduce some of your insurance costs, as well as reviewing your personal property limits to fit your needs.
2025 Forecast: Unfortunately, we expect to continue to see large rate increases well into 2025 in the range of 10-50%, depending on certain home characteristics.
Flood Insurance
One of the many natural disasters that you can not hide from is flooding. Over the past few years, it has become obvious that you do not need to live by a body of water to become a victim of a flood. Flash flooding from major rainstorms has caused more damage than rising tidal waters in the New York area. Surprisingly, we have seen reasonable NFIP flood increases. However, due to the recent storms down south, I expect that to change in the upcoming year. Private flood has been a great option, however high-risk flood zones have essentially become uninsurable in the private market recently.
Risk Mitigation
Insurance carriers are offering some additional options if you choose to reduce your risk when it comes to claims. A few new products on the market are automatic water shut-off devices. This is a device that is installed in line of your water pipe, it monitors your water flow and can automatically shut off your water supply if it detects a leak. This product greatly reduces the amount of damage a small or large leak can cause. Having this installed in your home could not only save you some premium but also save you thousands in the event of a broken or burst pipe.
Ting is another device to help reduce the risk of electrical fires. It is a device that gets installed in any outlet of your home and monitors your electricity, it can detect a problem and notifies you to turn off your electric or to call in an electrician to trouble shoot the problem. Electrical fires make up about 24,000 fires that are reported each year.
Overall 2025 Forecast: As we end out 2024 and cross over into the new year, I expect that the hard market will continue. It looks like insurance carriers will continue to be conservative with taking on new business, especially in high-risk areas like the coast and out east. Many clients will be forced into Excess & Surplus Lines (non-admitted) markets, which often come with lower limits, higher deductibles, and higher premiums. Moving forward, it’s best to use your insurance for worst-case scenarios only. Having claims on your record could essentially make your property uninsurable, especially if you are in a coastal area. It’s best to increase your deductible, reduce some of your personal property coverage, and hold on for the ride.
