Author: Kimberlee | August 27, 2025
Edited by: Kimberlee and Reviewed: Kimberlee
The wildfire in Pacific Palisades, California, brought to light some scary trends in homeowners insurance. Many carriers had recently cancelled policies as they moved out of the high-risk California marketplace. In fact, about 1,600 policies were dropped in the area in July of 2024, just months before the raging wildfire destroyed the city. This is just one example of trends in homeowners insurance that you need to be aware of. Let’s take a closer look.
There are both positives and negatives in the current landscape of homeowners insurance. While the insurance industry becomes more efficient in assessing risk and handling claims, there is a decrease in coverage options as the market hardens to risks such as frequent natural disasters. Homeowners in high-risk areas are at increased risk of losing insurance and finding it more difficult to get a new policy as insurance companies take measures to reduce their portfolio risk.
The insurance industry is relying on technology more and more.
Insurance companies are relying on insurtech to help them assess risk when insuring homeowners. Insurtech is technology specifically used by the insurance industry to underwrite new policies and handle claims. The global insurtech market was $5.3 billion in 2024 and is expected to increase dramatically in the coming years. Insurtech is noted as the digital transformation of insurance with technological advancements that reduce cost and increase efficiency.
Artificial intelligence (AI) is transforming the way insurance companies do business. It is used in underwriting to help identify risk and properly insure it. It is also used in claims processing to gather data faster and more efficiently, exposing fraud in many instances. AI is also used in customer service to help improve the customer experience.
As homes have become integrated into the internet, they have become better equipped to prevent and detect loss incidents. For example, water sensors can detect a potential water claim before it gets out of hand, notifying homeowners of a pipe burst or water heater failure. This can mitigate damages and reduce claim costs. This revolutionary technology is helping to give some homeowners reduced costs in a rising cost insurance industry.
Some states are more affected by climate change than others. States close to the shoreline are at risk of more frequent and severe storms. This has caused some insurance companies to pull out of the state and not offer insurance there. Those that do offer insurance have higher premiums, often unaffordable for most middle-class families. This adjustment in risk assessment models makes getting and keeping homeowners insurance more difficult.
Ultimately, homeowners need to adapt to rising costs and premiums nationwide for insurance companies to remain profitable in most markets.
Homeowners in high-risk states must adapt to new normals and find ways to get the insurance they need to protect their homes at an affordable price. This is just the state of the industry at the moment, where rising costs just have to be accepted.
Work with your insurance company to assess your coverage and ensure that you are properly covered but not overinsured. There is no sense is spending more on premiums than you need to.
Do what you can to mitigate risks. This may mean installing things like hurricane shutters or other mitigation measures. This will help you qualify for the lowest possible rates because you are helping to protect your home.
It’s worth your time to shop around for home insurance. Check with multiple carriers to find the best rates with the coverage that you need.
When possible, bundle your home with auto insurance to take advantage of generous bundling discounts. Most companies offer at least 10% off the home policy when you bundle. You also save on the auto policy.
Use technology in your home to help mitigate risk. Have alarms that alert authorities when there is a problem, such as a break-in or fire. Get smart home technology to detect water intrusion that will notify you of a problem before it gets too damaging. Using technology can help reduce your insurance premiums.
The future of the insurance industry looks like more of dealing with climate change and increased risk states. Insurance companies will continue to assess risk, look for ways to become more efficient in handling claims and eliminating fraud, and seek to remain profitable. This means more people may find that certain insurance companies are not available in their areas. Prices will likely continue to rise while homeowners struggle to meet the insurance demands of mortgage companies.
Personalizing a policy is a good way to get insurance at an affordable price.
Usage-based models have become more popular with auto insurance, but there is a rising trend in homeowners insurance. Insurance companies can monitor usage with smart home devices to help track risk and bring premium costs down.
Insurance companies are using data more than ever to assess risk and underwrite policies based on individual risk factors. Two homes located in a flood zone may have different risk factors even though they both sit in the flood zone. Getting more data helps insurance companies better understand risk and write policies to protect homes.
With everything going digital, homeowners need to be aware of cybersecurity issues that lead to identity theft. Consumers should ensure that their homeowners insurance policy has identity theft protection and take measures to ensure that their smart home is protected with VPN and firewall protection.
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