By Max Dorfmann, Research Writer, Triple-I
The cost of claims per insured home in the United States has risen at a rate that has outpaced inflation over the past 20 years, according to the Insurance Research Council (IRC) — as Triple-I, an affiliate of the institutes.
A new study by the International Rescue Committee, Trends in homeowners insurance claims: 2001-2021He attributes this to a combination of natural disasters, man-made disasters, rising home repair costs, and constant population migration to disaster-prone areas.
Insurance companies also continue to grapple with insurance fraud and claim abuse after catastrophic events. These trends have slashed profits and prompted many major insurance companies to reduce capacity in some US states or leave the homeowner market entirely.
Other results include:
- Nationwide average costs of loss (average claims payments per insured home) have increased over the past two decades and are up 9% in 2021.
- Claim severity increases, while frequency decreases – in part because of the widespread adoption of higher policyholder discounts, including a percentage deductible for specific risks, and add-on fee programs designed to reduce the number of low-cost claims.
- Disaster losses play an increasing role due to trends in natural disasters and the methods used to identify and classify disaster claims.
- Average loss costs for claims vary greatly by state. The states with the highest loss costs are Louisiana and Mississippi; The states with the lowest are Hawaii and Maine.
- The states with the highest frequency of claims during the period include Louisiana, Mississippi and Oklahoma. The most dangerous states include California, Alaska, and Florida.
“During the two decades of the study period, the U.S. homeowner market experienced high volatility, primarily driven by a barrage of disasters such as Hurricanes Katrina, Ike, Michael, Rita, Sandy, and Wilma, and the California wildfires,” Dale said. Porfilio, president of the International Rescue Committee and chief insurance officer of Triple-I.
Porfilio also noted that another challenge facing the homeowners insurance market is the constant threat of insurance fraud and abuse, especially after natural disasters.
“Industry and government organizations have increased their efforts to inform consumers about potential fraud, investigate and prosecute perpetrators, and enact legislative changes to make systems less vulnerable to abuse,” Porfilio added.
Learn more:
How and How Inflation Affects P/C Insurance Rates (Brief Triple-I Issues)
Homeowners Insurance Rate Increases (1st Triennial Summary Summary)
The Florida Homeowners Insurance Crisis (Tri-I Briefing)
The Louisiana Insurance Crisis (Tri-I Summary)
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