Insurance Costs in Enid: A Reflection of the Distorted US Housing Market

Enid, Oklahoma, an idyllic town surrounded by sprawling farms, has earned a dubious reputation: It boasts the highest home insurance costs relative to property value nationwide. This sheds light on the increasing distortions in the American insurance system, which is buckling under the impacts of climate change. Despite not being regarded as highly weather-vulnerable, Enid records higher insurance costs than areas like New Orleans, the Florida Keys, or the California town of Paradise—all of which are known for natural disasters. These absurdities in the system have led to scenarios where people in some regions pay far more for insurance than the actual risk would justify. The reasons for these discrepancies are manifold. The lack of regulation in some states gives insurance companies free rein to raise rates, while states with stricter regulations tend to have lower premiums. Additional cost factors include insurance fraud and varying minimum coverage requirements. These price distortions have far-reaching consequences. In regions with overly high premiums, homes can become unaffordable, while low premiums in high-risk areas can entice people to settle in vulnerable zones. The market thus incentivizes "all sorts of crazy behaviors," says Ishita Sen, a professor at Harvard Business School. The backdrop of these developments was illuminated by a study conducted in collaboration with CoreLogic. Researchers Benjamin Keys and Philip Mulder analyzed data from around 12.4 million households and revealed that average premiums nationwide rose by 33 percent between 2020 and 2023. In Enid, for instance, the typical homeowner paid $2,113 in insurance, which represents 3.5 percent of the average home value. The increased costs are heavily burdening the population. Many people, like Kelsey Keyworth, are being forced to sell their homes and move into smaller apartments, often due to price reasons. Real estate agents also report customers having to downsize their planned homes or experiencing "sticker shock." Oklahoma's insurance oversight adopts a liberal market orientation, which experts say leads to inflated premiums. Insurance Commissioner Glen W. Mulready rejects regulation and relies on competition, while critics like Dr. Sen and politician Forrest Bennett call for further reforms and more transparency. The rising insurance costs, coupled with the effects of climate change, are also attracting political attention. Senator Sheldon Whitehouse warned of the extensive economic risks that could arise from the increase in weather extremes and the distorted insurance landscape. These developments, according to Benjamin Keys, should "sound alarm bells" for real estate markets across the country. The rising premiums are a tangible indication that the real estate market may be heading towards an unpredictable and potentially destabilizing future.