ENID, Okla. — Surrounded by farms about 90 minutes north of Oklahoma City, Enid has an unwelcome distinction: Home insurance is more expensive, relative to home values, than almost anywhere else in the country.
Enid is hardly the American community that is most vulnerable to damaging weather. Yet as a share of home prices, insurance costs more in parts of Enid than in New Orleans, much of which is below sea level. More than in Paradise, California, which was destroyed by the Camp fire in 2018. More than in the Florida Keys, which are frequently wracked by hurricanes.
Enid’s plight reveals an odd distortion in America’s system of pricing home insurance. As a warming planet delivers increasingly damaging weather, the cost of home insurance has jumped drastically. But companies are charging some people, especially in the middle of the country and parts of the southeast, far more than other homeowners with similar levels of risk, an examination by The New York Times has shown.
Industry experts offer several reasons for the disparities, including the fact rural states have fewer homeowners to share risk, and states have varying rates of insurance fraud, which can drive up premiums.
But recent research points to a striking pattern: Higher premiums are being charged in states where regulators apply less scrutiny to requests for rate increases, compared with states where officials question the justifications offered by companies and try to keep rates low, the research shows.
The effects of those state-by-state regulatory differences are only now becoming clear. In a separate paper, new data makes it possible for the first time to see what households pay for home insurance by county and ZIP code across the United States. The average premium jumped 33% between 2020 and 2023, far more than the rate of inflation, the data shows. But in some places, homeowners are paying more than twice as much for insurance, as a share of home value, than people who live elsewhere and face similar exposure to severe weather.
As a result, America’s home insurance market is increasingly distorted, said Ishita Sen, a professor of finance at Harvard Business School who studies why insurance rates diverge from risk.
In communities where insurance rates exceed the actual risk, homeownership can be unaffordable. And in places where insurance prices are too low, it encourages people to move into homes in areas likely to be hit by wildfires or other disasters that could deliver financial ruin, Sen said.
Getting a detailed look at the cost of insurance in different parts of the United States has been almost impossible until now because private insurers don’t publicly disclose what they charge. But two researchers, Benjamin Keys, a professor of real estate at the University of Pennsylvania’s Wharton School, and Philip Mulder, a professor at the University of Wisconsin School of Business, found a workaround.
Homeowners often pay their insurance premiums together with their mortgage and property tax, through an escrow account. They make a single payment every month to a mortgage service company, which then pays the mortgage lender, the local government and the insurance company. The system is designed to ensure homeowners never miss a payment.
Working with CoreLogic, a property information and analytics company that obtains data from mortgage servicers, the researchers obtained data for about 12.4 million of the nation’s roughly 80 million owner-occupied households. That data showed how much those households paid in escrow annually from 2014 through 2023. After deducting payments for mortgages, property tax and other fees, they could estimate what each household paid for property insurance.
There is certainly a relationship between climate risk and what insurance companies charge for coverage in case of damage from extreme weather. But all kinds of other factors get in the way, causing a misalignment between risk and premiums.
In McCurtain County, Oklahoma, for example, the typical homeowner paid an average of $2,837 for insurance. But in the same area with the same weather just across the state line, the average homeowner in Little River County, Arkansas, paid $1,673.
The cost of insurance is often higher for large, expensive homes because they cost more to replace. To get more accurate comparisons, Keys and Mulder looked at insurance costs as a share of the typical local home value.
Across the more than 9,000 ZIP codes for which data was available, the typical U.S. household last year paid about $500 in home insurance premiums for every $100,000 of home value, or 0.5%, the professors found.
But in California, which suffered through more than 7,000 wildfires last year, the typical homeowner in many ZIP codes paid premiums as low as 0.05% of home value. By contrast, in parts of Alabama, Oklahoma, Louisiana and Texas, the average homeowner faced home insurance premiums greater than 2% of the value of local homes.
“Families with the same level of risk exposure pay wildly different amounts to protect themselves from harm,” Keys said. “Different prices for the same risk feels unfair.”
A visitor to Enid, population 50,000, would not recognize it as the riskiest spot in America to own a house. The federal government designates Garfield County, which includes Enid and sometimes experiences hailstorms and tornadoes, as having a “relatively low” level of risk. Yet the typical Enid homeowner spent $2,113 on home insurance last year, according to the researchers. That was 3.5% of the average home value of about $60,000 — more than six times the national average.
Oklahoma is the sixth-most expensive state for home insurance. (The top five are Florida, New York, Louisiana, Colorado and Hawaii.) But measured as a share of home value, Oklahoma ranks third, behind Louisiana and Mississippi.
Along the edges of Oklahoma, the premium paid by the typical household last year was as much as 70% higher than in adjacent counties in Texas, Arkansas and Kansas — despite those counties having similar levels of exposure to disasters, according to federal data.
Glen W. Mulready, Oklahoma’s elected insurance commissioner, has never exercised his power to deny a rate increase requested by an insurance company for home insurance. He said he believed that competition, not regulation, was the best way to hold down prices.
But that could be one important reason Oklahoma homeowners with relatively low risk are paying high premiums, according to Sen.
In states where officials tightly control what insurance companies can charge, premiums tend to be priced below what they would be if they reflected the true likelihood of damage from storms, fires or other catastrophes, she said.
And Sen and her co-authors, Sangmin S. Oh and Ana-Maria Tenekedjieva, discovered something else.
After big losses in those tightly regulated states, such as California, national insurers tend to raise rates in more loosely regulated states. In other words, homeowners in states with weaker rules may be overpaying for insurance, effectively subsidizing homeowners in states with tougher rules, she said.
If California makes it especially hard for insurers to increase premiums, Oklahoma makes it much easier.
Mulready defended his approach, saying it’s not his role to stop private insurance companies from raising rates in Oklahoma.
“We allow the competitive free market to work,” he said in an interview. If national companies raised rates in Oklahoma to make up losses in states like California, they would lose business to local insurers, Mulready said.
But Sen said her research suggests the home insurance market is far less competitive than it might seem. After choosing an insurer, people often stick with that same company, even if their premiums go up, she said.
Three insurers — State Farm, Farmers, and Allstate — collectively wrote more than half of all home insurance in Oklahoma last year. A spokesperson for Allstate, Michael Passman, said in a statement that “we do not raise rates in one state to offset losses in another.” State Farm and Farmers did not respond to questions.
There are some other possible explanations for why insurance companies charge wildly different rates in places facing similar threats.
Insurance can be more expensive in smaller, more rural states, where there are fewer households to share the risk, said Karen Collins, a vice president at the American Property Casualty Insurance Association, which represents insurance companies. Some states require higher minimum levels of coverage, which makes policies more expensive. And fraudulent claims, which end up increasing premium costs, can be more prevalent in some locations than others, she said.
Reinsurance is another reason. The price of reinsurance (effectively, insurance purchased by insurance companies to make sure they can cover losses) has spiked in recent years. Companies buy different amounts in different parts of the country and pass those costs on to homeowners.
A fourth factor is whether a state has a government-mandated, high-risk pool of insurance, designed for homeowners who cannot find private coverage. Research suggests those pools, which are available in about two-thirds of states, can lower private insurance premiums.
Even in places where insurance costs remain relatively flat, the disconnect between premiums and actual risk is cause for concern, Keys said. As climate change gets worse, those insurance costs will eventually rise, and possibly quickly, he said — hurting home values, shocking some homeowners and destabilizing real estate.
“I personally think we’re in a lot of trouble,” Keys said. “This should be ringing alarm bells for housing markets all over the country.”
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