The Boulder Fire near Carefree, AZ on June 28, 2024
The Buzz for April 4, 2025
The cost of homeowners insurance is on the rise in Arizona. A report from The Consumer Federation of America shows insurance rates in the state went up by 48% between 2021 and 2024, the third highest rate in the nation.
The report does not highlight the exact causes of the increase, though one member of the legislature believes it is part of a trend of insurance policy non-renewals due to wildfire risk.
Republican State Senator Mark Finchem held a hearing in the Senate Federalism Committee on the topic.
He blames the issue largely on a lack of federal action to mitigate fire risk and environmental groups while holding up the tribes as examples of proper management.
"So the Navajo Nation and the White Mountain Apache, they're active land managers. And if you look at their forests, they look nothing like the forests that have blown up in fire in California, Oregon, Washington state, and even here in Arizona. I mean, you look at the Rodeo Chediski Fire and some of the other fires that we've had here that are hundreds of thousands of acres, and one of the big problems that we have is litigation that prevents different agencies, both federal and state, from doing the job of active land management."
Sen. Finchem said he received numerous reports from constituents about homeowners' insurance issues. AZPM also tracked down several claims of similar issues in Tucson's Catalina Foothills neighborhood on social media, including NextDoor.
He said funding local fire departments to provide subsidized fire fuels mitigation on private property would be a good start to the problem in the short term, particularly in rural places.
While states including California, Florida, and Texas have formed insurers of last resort to help fill the gap, Sen. Finchem would rather Arizona act as a re-insurer, an industry that offers insurance companies a policy of their own against large-scale catastrophes.
"When you are paying out more in claims than you're taking in in premiums, that's a recipe for bankruptcy. So I think there is merit to the state funding a treatment program for the rurals. There is also, I think, an opportunity for the state to step in and say, 'we want to have a reinsurance program.'"
AZPM asked the Arizona Department of Insurance and Financial Institutions if it received reports of such issues from either residents or insurance companies. It does not.
That prompted us to ask Sen. Finchem if he thinks tracking such information would be useful in fixing the issue. He said he is generally against intervention by government into the business sector, but this may be an instance where it is necessary.
""If the insurance carriers want to have a government backstop, then they've got to come to the table with something, and I think your idea of reporting probably needs to be at the individual level without identifying the homeowner and not even necessarily identifying the property that's involved. But I think that's an essential piece in the public policy realm for us to say, 'alright, at what level is the state going to be involved in promoting a reinsurance program?' And I think even our colleagues at the federal level would need to have that just so they can scope, 'How much money are we going to have to come in with this in order to alter the trajectory of these claims?' Now at the same time I think that because of that you're also able to plot that on a map and make sure that those properties that are being canceled have some sort of Nexus with the catastrophic loss that the insurance carrier is claiming it's linked to."
From the insurer's side, natural disasters are one of several factors. Inflation in construction costs and rising prices of housing also play a role.
"The insurance costs from inflation for property reconstruction replacement costs surged much higher, jumping upwards of 50-60%," said Karen Collins, Vice President, Property and Environmental at the American Property Casualty Insurance Association. "Now, fortunately, these trends have come back down a little bit. They've stabilized, but on a cumulative basis, they remain up. Upwards of like 30% since the start of the pandemic. In addition to that, you have seen a lot of natural disasters across the US as more homes and communities are built in more areas. Certainly, Arizona has had a lot of growth in recent years, so as more people live and work in what have really been viewed as more expensive homes and buildings in some of these hazard-prone areas, that's increasing the level of losses that we're seeing as an industry. And there's some other factors, things like unchecked legal system abuse, and in some cases, we're seeing regulatory mandates. All of this is making it increasingly more difficult for insurers to really prudently manage risk."
She said 73% of insurance losses due to natural disasters occur in the U.S. and the warm, dry parts of the American West are particularly concerning.
"[The National Oceanic Atmospheric Agency] identified Arizona had like $5 billion in weather events recently, just from drought. When you have severe drought in these higher heat cycles, it's adding to wildfire risk. And we're seeing these events across the West, and they are actually more significant losses, just because when a wildfire impacts a home, there is usually nothing left."
To help find ways to mitigate damage–and thus losses–caused by extreme weather, the insurance industry has funded the Insurance Institute for Business and Home Safety.
There are three areas of particular concern when it comes to the spread of wildfire into homes, according to Steve Hawks, the institute's Senior Wildfire Director.
"That's drought that occurs at any scale, making the wildland fuels more receptive to the ignition of a fire and spread of the fire, and then strong wind events that leads to the extreme fire behavior that you get under those conditions, and then a fire that starts close by a built environment, like a neighborhood or community where the fire then is quickly pushed by the dry fuels and the strong winds into that community and then begins to ignite."
Hawks said that building codes that make homes more fire resilient add about 3-7% to the cost of construction, which means they are not necessarily cost-prohibitive.
"We really need to be focused on making sure that the homes are built to be able to have the best chance. Survival that allow the people to return to a home after the wildfire passes through, and also allows the homeowner to have a better chance of getting insurance and maintaining insurance and making the home more insurable."
In places where there are a high number of homes that insurers will not cover, states often launch public options commonly called insurers of last resort. One such place is Florida, where hurricanes caused a need for the state to establish Citizens Property Insurance.
Craig Fugate was the director of Florida's Division of Emergency Management when that state launched CPI. He went on to head up the Federal Emergency Management Agency during the Obama Administration.
"As the insurance industry is unable to either provide products or provide products that are affordable, states are finding that this becomes a huge issue and growth. If you can't insure new construction, people can't get a mortgage, and this is really true in Florida and other places where they got the mortgage, and they got the financing, and then when they got their insurance, they couldn't close. It was too high, or in some cases, it just wasn't available anymore. And so states are, in many cases, finding that pressure from builders and developers and realtors to provide affordable insurance or just make insurance available," he said.
When a disaster strikes, CPI can spread out the cost of paying out claims in a variety of ways, some of which a normal insurer wouldn't be able to handle.
"[Citizens Property Insurance] build their reserves up when they don't have to pay out. They do use reinsurance to a certain point, but in the event they have a catastrophic loss and they don't have the funds to pay out the claims, they'll issue a bond to pay those claims. The way they finance that bond, and the way they can write that bond is they have the authority to put a surcharge on every insurance policy in Florida, including those for your car and other activities that aren't related to homeowners insurance," he said.
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