WASHINGTON — Delaware families and businesses may be getting hit with excessive insurance costs as part of a nationwide overcharging pattern worth $150 billion annually, according to fresh research that calls for federal intervention to provide relief.
The Vanderbilt Policy Accelerator study, shared exclusively with The Associated Press, reveals that insurance companies are distributing far less money for claims following accidents, natural disasters, and other covered events compared to previous decades. In 2024, insurers returned just 62 cents in claim payments for every dollar collected through premiums, a significant drop from the 80-cent average during the 1980s and 1990s.
This research enters complex economic and political territory as insurance providers navigate climate change risks while consumers struggle with expensive groceries, fuel, and housing costs. Insurance companies defend their premium increases by pointing to rising home and vehicle values plus increased repair expenses.
“The fact that the loss ratios are so low means that the insurance industry is charging too much,” stated Brian Shearer, who directs competition and regulatory policy at the Vanderbilt University research center and previously served as a senior adviser at the Consumer Financial Protection Bureau.
Industry representatives counter that current payout ratios reflect recent financial challenges and necessary measures to maintain stable, solvent insurance operations.
“Current loss ratios reflect the impact of enormous financial losses over the last several years and the steps insurers have taken (to) maintain and restore financial strength so funds are available to pay future claims,” explained Don Griffin, vice president for policy and research at the American Property Casualty Insurance Association, in an email response. “Loss ratios in the 1990s were driven to nearly unsustainable levels by Hurricane Andrew in particular.”
Despite President Donald Trump’s second-term pledge to control inflation, he has also dismantled agencies like the CFPB that worked to identify consumer savings opportunities. Housing expenses remain especially burdensome, with average mortgage rates staying above 6%, and Trump’s executive order promoting new home construction will require years to impact housing affordability.
During Trump’s March signing of the housing regulation order, the Republican president stressed his elimination of enhanced standards designed to protect homes from natural disaster damage and improve energy efficiency, claiming these requirements inflated construction expenses.
“We will slash many of these pointless regulations that do nothing for safety and add lots of costs,” he declared during the ceremony.
Economic research conducted by Benjamin Keys and Philip Mulder discovered that homeowner insurance premiums jumped 28% after adjusting for inflation between 2017 and 2024, reaching an average annual expense of $2,750. Their findings identified contributing factors: approximately one-third stemmed from elevated construction costs, while another 20% resulted from increased disaster exposure. The research also highlighted rising expenses for financial products like reinsurance, which insurers buy to shield themselves from catastrophic losses.
The Vanderbilt study takes a different approach by examining the difference between insurance company collections and customer payouts. By returning to the historical 80-cent payout rate per dollar collected, researchers estimate households and businesses could have retained approximately $150 billion from the more than $1 trillion in premiums paid during 2024.
The research includes draft federal legislation language establishing higher mandatory loss ratios for insurers. While state governments currently oversee most insurance regulation, federal requirements would prove more difficult for companies to contest.
The study further contends that insurers are directing premium money toward “corporate perks, corporate jets, stock-buy backs, excessive executive compensation, excessive dividends, excessive advertising, and excessive agent commissions.”
“Companies are competing against each other, not based on price but just based on brand awareness,” argued Shearer, who authored the analysis, claiming excessive marketing spending drives up costs.
