By Max Dorfman, Research Writer, Triple-I
The cost of claims per insured home in the United States has increased at a rate that exceeds inflation over the past 20 years, according to the Insurance Research Council (IRC) ̵
1; as Triple-I, a subsidiary of The Institutes.A new IRC study, Trends in Homeowner’s Insurance Claims: 2001–2021attribute this to a combination of natural disasters, man-made disasters, rising home repair costs and ongoing population migration to disaster-prone areas.
Insurance companies also continue to grapple with insurance fraud and claims of abuse after catastrophic events. These trends have reduced profits and caused several major insurance companies to reduce capacity in some US states or exit the homeowner market altogether.
Other findings include:
- Nationwide average claim costs (average claims per insured home) increased over the past two decades and will rise by nine percent in 2021.
- The severity of claims is increasing, while the frequency is decreasing—due in part to widespread use of higher policyholder deductibles, including percentage deductibles for specified perils, and premium add-on programs designed to reduce the number of lower-cost claims.
- Catastrophe losses play an increasingly important role due to natural disaster trends and the methods used to define and categorize catastrophe claims.
- Average loss costs for injuries vary widely by state. States with the highest loss costs are Louisiana and Mississippi; states with the lowest are Hawaii and Maine.
- States with the highest claim rates during the period include Louisiana, Mississippi and Oklahoma. States with the highest severity include California, Alaska, and Florida.
“Over the two decades of the study period, the U.S. home ownership market has experienced an increase in volatility, primarily driven by a barrage of disasters, such as Hurricanes Katrina, Ike, Michael, Rita, Sandy and Wilma and the California wildfires,” said Dale Porfilio, IRC President and Head of Insurance for Triple-I.
Porfilio also noted that another challenge facing the homeowners insurance market is the continued threat of insurance fraud and claims abuse, especially after natural disasters.
“Industry and government organizations have stepped up efforts to inform consumers about potential fraud, to investigate and prosecute perpetrators, and to enact legislative changes to make systems less vulnerable to abuse,” Porfilio added.
Read more:
How Inflation Affects P/C Insurance Prices and How It Doesn’t (Triple-I Issues Brief)
Drivers of Homeowner’s Insurance Increases (Triple-I Issues Brief)
Florida’s Homeowners Insurance Crisis (Triple-I Issues Brief)
Louisiana Insurance Crisis (Triple-I Issues Brief)
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