By Max Dorfman, Research Author, Triple-I
According to the Insurance Research Council (IRC), like Triple-I, a subsidiary of The Institutes, the cost of claims per insured home in the United States has risen faster than inflation over the past 20 years.
A new IRC study, Homeowner Insurance Claim Trends: 2001–2021attributes this to a combination of natural and man-made disasters, rising home repair costs, and the continued migration of populations to disaster-prone areas.
Insurers continue to struggle with insurance fraud and claims abuse following catastrophic events. These trends have eaten into profits and prompted several large insurers to reduce capacity in some US states or exit the homeowner market altogether.
Other insights are:
- The nationwide average cost of claims (average claims payment per insured home) has increased over the past two decades, rising 9 percent in 2021.
- Claims are increasing in severity while frequency is decreasing – partly due to the widespread introduction of higher policyholder deductibles, including percentage deductibles for certain perils, and premium surcharge programs aimed at reducing the number of lower cost claims.
- Catastrophe losses are playing an increasing role due to natural catastrophe trends and the methods used to define and categorize catastrophe losses.
- The average damage cost for claims varies widely from state to state. States with the highest damage costs are Louisiana and Mississippi; States with the lowest are Hawaii and Maine.
- The states with the highest claims incidence during the reporting period include Louisiana, Mississippi and Oklahoma. The states with the highest severity include California, Alaska and Florida.
“During the two decades of the study period, the U.S. homeowner market experienced an increase in volatility, driven primarily by a spate of disasters such as Hurricanes Katrina, Ike, Michael, Rita, Sandy and Wilma, and the California fires,” Dale said Porfilio, IRC President and Chief Insurance Officer for Triple-I.
Porfilio also noted that another challenge facing the homeowners insurance market is the continued threat of insurance fraud and claim abuse, particularly in the aftermath of natural disasters.
“Industry and government organizations have increased their efforts to educate consumers about potential scams, investigate and prosecute perpetrators, and enact legislative changes to make systems less vulnerable to abuse,” added Porfilio.
Learn more:
How Inflation Affects P/C Insurance Rates and How It Doesn’t (Triple-I Issues Brief)
Reasons for Homeowner Insurance Premium Increases (Triple-I Issues Brief)
Florida’s Homeowners Insurance Crisis (Triple-I Issues Brief)
Insurance Crisis in Louisiana (Triple-I Issues Brief)
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