Insurance Challenges Demand Adaptations Amid Rising Risks

Today’s housing market dynamics are rapidly evolving. While recent adjustments in mortgage rates signal a potential uptick in new-home demand, homebuilders face a growing set of challenges beyond financing. Insurance premiums for new homes are increasing at rates unseen in decades, driven by climate-related risks, building material costs, and insurers pulling out of high-risk regions. This reality creates a multi-layered challenge for homebuilders: they must not only address buyers’ financial constraints but also manage operational efficiency and customer satisfaction in a climate of volatility.

In a recent conversation for our Focus On Excellence-TBD Player videocast series, Tom Kriby, Vice President of Client Development and Partnerships at Westwood Insurance Agency, provides critical insights into these insurance complexities. Kriby’s expertise illuminates the importance of innovative insurance solutions, technology integration, and robust partnerships with insurance providers to ensure seamless, affordable homebuying experiences. For top homebuilding executives, Kriby’s insights underscore a pressing need: the time has come to treat insurance not as an afterthought but as a central element of the homeownership journey.

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Embedding Insurance in the Homebuying Process

One of the most promising adaptations is the concept of “embedded insurance,” an approach Kriby describes as integrating insurance within the home purchase process from the start. Traditionally, insurance was considered late in the homebuying timeline, often introduced only at the closing stage. However, as Kriby explains, the evolving risk landscape calls for a proactive model.

We call it embedded insurance, an option built into the sales contract process,” says Kriby. “We know the home and all the features of the home so all we have to do is match up the home buyer with the pre-underwritten policy…that way, the homeowner can knock insurance coverage off the list early.”

Embedding insurance offers two distinct advantages. First, it allows builders to streamline their buyers’ experience by eliminating last-minute obstacles. Second, it provides price transparency, which Kriby emphasizes is essential in today’s environment where affordability challenges compound buyers’ stress. For builders, embedding insurance is an opportunity to add value and gain the trust of new-home buyers from day one.

Prioritizing Transparency in a Volatile Market

Price transparency is critical for building trust with rising premiums and fewer options. Westwood Insurance Agency’s embedded model ensures buyers know their monthly costs early, including insurance premiums, to prevent budget surprises. This transparency is a strategic asset in volatile markets where prices are hard to predict.

In today’s market, with rates higher than they’ve been in a long time, affordability is key,” says Kriby. “Insurance used to be back of mind…now we’re working to help buyers and builders understand the real costs and make sure the process is seamless from contract to closing.”

This upfront approach goes beyond convenience; it positions builders as trustworthy partners prioritizing buyers’ financial stability. For builders working in areas with high insurance costs, transparency mitigates buyer hesitation and enhances the overall customer experience.

Leveraging Partnerships to Build Resilient Homes

With rising insurance costs, resilience is paramount. Climate events, from hurricanes to wildfires, have proven the need for high-quality construction to withstand natural hazards, especially in risk-prone areas like the Gulf Coast. Kriby highlights how Westwood collaborates closely with builders and insurance partners to ensure homes are built to withstand environmental pressures.

We’ve had audiences with the C-suite of many large public builders who ask for recommendations on making homes more resilient,” Kriby explains. “They want to make sure the home they’re building is sustainable long-term, not just for the first homeowner, but for the resale value for the third and fourth homeowner.”

For builders, this shift toward resilient construction is a strategic move that can positively impact market positioning and long-term customer satisfaction. In addition to adding resale value, resilient homes can qualify for lower insurance premiums over time, reducing financial strain on buyers and builders.

For High-Risk Markets, Tailored Insurance Solutions

As climate risks escalate, insurers have scaled back in high-risk areas, limiting coverage options. This trend, particularly prominent in Florida and California, makes Westwood’s approach invaluable. By working closely with builders, Westwood ensures insurance policies are tailored to meet the specific risks of each location, providing coverage options even in the most challenging regions.

Our insurance company partners understand the value that a brand new home brings,” says Kriby. “The risk and claims opportunities are significantly lower than for a 20, 30, 40-year-old home.”

This partnership model ensures that builders can continue to operate in high-risk areas without facing the roadblocks that typically accompany limited insurance availability. By collaborating with insurers who recognize the strength of new construction, builders can offer coverage options that might otherwise be unavailable.

Preparing for Market Resets and Rising Premiums

In high-risk areas, the cost of protecting homes is rising. Kriby points out that for many regions, the era of low-cost insurance is over, and a “market reset” is underway. Homebuilders need to prepare buyers for this reality, as affordability challenges persist and insurance costs reflect the actual risks of ownership.

There’s going to be a bit of a painful time in some markets,” says Kriby. “The true cost of protecting your home isn’t $600; it’s likely closer to $1500 to $2000. So there’s going to need to be a reset on comfortable affordability and pricing.”

This means acknowledging that insurance will no longer be a negligible expense for homebuilders. By anticipating these adjustments and communicating them transparently, builders can help buyers understand the total cost of homeownership. Additionally, builders may consider providing incentives or partnering with insurers to offset the initial impact of higher premiums.

Building for the Future in an Unpredictable Landscape

As Kriby’s insights reveal, the insurance landscape is shifting, and these changes have broad implications for the homebuilding industry. For executives, the imperative is clear: adaptability and proactive planning are now essential components of successful homebuilding strategies. By embedding insurance into the sales process, prioritizing transparency, investing in resilience, and aligning with strategic partners like Westwood, homebuilders can not only navigate today’s challenges but also position themselves for long-term success.

Homebuilders who embrace these practices are better equipped to manage the demands of an evolving market and ultimately enhance the experience of every buyer. As Kriby aptly puts it,

We’re here to make sure that buyers feel secure and valued from day one,” a message that resonates deeply in an industry that values trust, quality, and resilience.