You don't have to own a home on the Cape to be impacted by rising home insurance premiums in our region.
That's according to Tyler Jager of the Provincetown Independent.
CAI's Gilda Geist spoke with Tyler recently to learn more.
Gilda Geist Let's just start with the basics. What is home insurance and, briefly, how does it work?
Tyler Jager Home insurance, broadly speaking, is coverage that protects property in the case of accidents, perils—like theft—or disasters, like wildfires and hurricanes. It's usually done through a contract between a property owner and a private insurer. And one reason it's very important is that it's a requirement of most federally backed mortgages. So not having it or being dropped by an insurer can make a mortgage much more difficult to get. It's usually paid with an annual premium. And another thing to note here is I think Cape Codders are very familiar with flood damage and rules around flood insurance—that if you're in the 100-year flood zone, you usually need to buy it. Now home insurance is a separate thing. It usually doesn't cover flood damage. So, questions about, for instance, where your property appears on a FEMA map of the floodplain isn't as relevant to home insurance policy, although, of course, floods and hurricanes tend to correlate together.
GG As you report, home insurance is becoming increasingly unaffordable on some parts of the Cape. So, what's behind those rising costs?
TJ So I think a lot of agents and experts in the insurance industry would say there are a lot of external pressures on the industry, on the Outer Cape in particular. We see this all across the housing market—higher construction, building costs, labor costs. As home values increase, then the replacement value also increases of homes. There's also reinsurance, which refers to, essentially, insurance for the insurance companies, which are even less likely to take on risk in their portfolios. And I think that's the broader trend we're seeing here, is as disasters are projected to take place more often, insurers are facing greater risks. They argue they need to price that into their premium and the rates they charge to consumers.
GG Who is being impacted by rising home insurance costs in our region?
TJ Well, I think apart from the obvious, which is homeowners, it's actually not just homeowners, is something we found in our story. And that's one reason the article sort of broadens [the term home insurance] to property insurance generally. Property insurance is going up at a wide range of buildings that vary in purpose and in value. We spoke to the pastor at the First Congregational Church, which is a very recognizable structure in Wellfleet. It was first dropped by its insurer, and then pays a premium that was once $18,000 and is now $30,000, representing a significant chunk of its operating budget. That's also true for affordable housing complexes on the Cape and other sorts of properties. So, property owners are affected. It can also lead to increased costs that are reflected in people's rent. So it's really an issue that goes beyond who you might think of as the typical person who'd be facing an increased premium.
GG What is being done to address this issue?
TJ So, this is not a new issue. There is a long tradition of consumer advocates on the Cape and Islands in particular, who have said that the state should do more to regulate the insurance industry and prevent rate hikes from affecting consumers here. And there is a group that I interviewed the founders of, the Citizens for Homeowners Insurance Reform, who say that the insurance commission in the state still should do more to challenge insurers' rate hikes and their projections of their risks from disasters. There's also legislation that's been introduced, I believe, by [State] Senator Julian Cyr to address some of those rising costs, both in terms of grants and tax relief for homeowners who are facing this, as well as protections for Cape Codders who are increasingly enrolling in the FAIR Plan, which is the state's lender of last resort, as it were. [It's] sort of like an insurance agency that's run by the state with a number of large insurers participating. It's seeing increased enrollment as people continue to be dropped by their insurers here. I think a lot of these advocates would say the legislature really needs to do more. It is a very complicated issue, but it's something that lots of households on the Cape are going to continue to see in their pocketbooks.
