The home insurance market could have a better year in 2025, according to Matic’s year-end trends and predictions report.

Heading into the new year, rate increases have begun to slow down. At the beginning of 2024, homeowners saw an average rate surge of 17.4% for new policies as insurers coped with inflation, severe weather and reinsurance costs. But the average increase for new policies dropped from 10.7% in the first half of the year to 6.6% in the second half.

Most major carriers achieved profitability by the middle of the year, and moderating inflation helped reduce repair expenses. Heading into 2025, the combined ratio for the P&C insurance industry stands at 98%, up 7 percentage points from this time last year.

“We’re seeing signs of improvement in the home insurance market, driven by a few key factors,” said Ben Madick, CEO and co-founder of Matic. “Inflation has started to slow, easing the pressure on repair and claims expenses. On top of that, many carriers received long-awaited approvals for rate increases, which has helped them align premiums with current costs and return to profitability.”

Several carriers, including Safeco, Travelers and Nationwide, have re-entered high-risk regions they’d previously left. The average number of quotes available per person has increased by 60% compared to March of this year.

Regulatory challenges persist in certain states, however. California, New Jersey and others have historically delayed or declined rate adjustments. With the industry returning to profitability, rate increase approvals might be more difficult to obtain, posing challenges if costs rise.

Weather also remains a wild card. Hurricanes Helene and Milton caused an estimated $55 billion in damages this fall. Flash floods from major rainstorms around the country, including the flooding caused by Helene in North Carolina, have impacted areas that weren’t traditionally considered flood risks.

“In 2025, we anticipate more emphasis on educating homeowners about the need for flood insurance, even in non-coastal areas, and increased attention on the effectiveness of the National Flood Insurance Program and private flood insurance market,” the report said.

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