Rising Property Premiums (Hunter Field Editor’s Note)

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I receive dozens of emails each week from national clearinghouses touting their latest and greatest state rankings.

“States with the most auto-loan debt.”

“Arkansas ranks near bottom of states whose residents prefer grocery delivery.”

They’re mostly garbage, but one recent list caught my eye.

Arkansas, according to LendingTree, has the 10th-highest average home insurance premiums in the nation, with an annual cost of $3,357.

While I’m reluctant to trust these rankings, LendingTree’s list aligns with MarketWatch, the National Association of Realtors and others. It also matches my recent experience shopping to insure a new property.

I ultimately found a great agent and a premium below the state average, but the ordeal was eye-opening.

Not only did I find significant upticks in rates, insurers weren’t covering things that were routinely covered in the past and often declined to offer a policy at all unless bundled with my vehicles and other insured property.

More roofs, for example, are now being covered at depreciation rather than at replacement cost, and some insurers are leaving the state entirely, citing a struggle to remain profitable.

All told, this means Arkansans on average are paying 34% more for homeowners insurance than they were five years ago, at least according to LendingTree and others.

We know the reasons well: an increase in severe weather events and related property damage, rising labor and materials cost and other inflationary pressures.

Arkansas has been hit especially hard after a multiyear run of tornados and hailstorms. The March 2023 tornado that tore through much of the Natural State seems to be an inflection point.

We can’t control the weather in the short term, so solutions are difficult. Arkansas lawmakers and the state Insurance Department have been studying some interesting ideas. For example, the department now allows insurers to offer different deductibles for wind and hail damage.

Officials have also explored creating a grant or tax credit program modeled after initiatives in other states to encourage home improvements that will make residences more resilient to wind and hail, decreasing the number of claims in the long run.

Some states have strengthened building codes, but I suspect that is a nonstarter in Arkansas.

I do worry about what this means for people who already struggle to afford a home and the downstream effects on the state’s economy. One wise friend lamented that Arkansas, if the trend holds, could find itself where Florida did in the early 2000s. Hurricane after hurricane decimated its property insurance market, and state legislators there created a state-run exchange, which remains to this day.

I hope we’re never pushed to that point.

Email Hunter Field, editor of Arkansas Business, at hfield@abpg.com