Category Archives: Homeowners Insurance

Disaster Preparedness, Disaster Resilience, Homeowners Insurance

Lightning Sparks
More Than $1 Billion
in Homeowners Claims
Over Five Years

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By Loretta Worters, Vice President, Media Relations, Triple-I 

More than $1 billion in lightning-caused U.S. homeowners insurance claims were paid out in 2021 to 60,000-plus policyholders, with 40 percent of that figure ($522 million) attributable to California alone, according to Triple-I.  

Based on national insurance claims data, the Triple-I found:

  • The total value of claims in 2021 were down more than 36 percent from 2020 but increased more than 43 percent since 2017, from $916.6 million to more than $1.3 billion;
  • The average number of lightning-caused U.S. homeowners insurance claims  fell more than 15 percent between 2020 and 2021, continuing a downward trend since 2017 of more than 28 percent; and 
  • The average cost per claim was also down 25 percent from 2020 (28,885 to 21,578),  but the five-year trend shows the average cost per claim has doubled, to $21,578 from $10,781.

The average cost per claim is volatile from year to year, but it has been particularly high in the past two years because of lightning fires throughout the country, the Triple-I noted. 

The outsized 2020 insured loss payout number nationwide was caused in part by California’s CZU August Complex fire, which was sparked by lighting.  The multiple blazes impacted Santa Cruz and San Mateo counties and caused at least one fatality. Alaska is currently fighting a wildfire in the southwest part of the state due to lighting. 

Not only does lightning result in deadly fires it can cause severe damage to appliances, electronics, computers and equipment, phone systems, electrical fixtures, and the electrical foundation of a home.  The resulting damage may be far more significant than a homeowner realizes.  Supply-chain delays are also sending appliances and electronics prices higher.

Florida—the state with the most thunderstorms—remained the top state for number of lightning claims in 2021, with 5,339, followed by Texas, Georgia, and California, respectively. California, which had 3,381 lightning claims, had the highest average cost per claim at $154,574, the second year to have an impact on the Golden State. 

Homeowners Insurance, Industry Financials, Market Conditions

Fla. P&C Crisis Worsens As Hurricane Season Begins

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Already this year, three Florida insurers have been declared insolvent due to their failure to obtain full reinsurance as the 2022 hurricane season bears down.

“We have the potential of a massive failure of Florida insurers, probably the worst on record,” says Triple-I communications director Mark Friedlander. According to Friedlander, the $2 billion reinsurance fund created in legislation Gov. Ron DeSantis signed into law at the end of May isn’t nearly enough, and private reinsurers are pulling back from the market because of its high level of property claims and litigation.

“It needed to be at least double the amount of the funds that were allocated for reinsurance coverage for hurricane season and open to other perils as well,” Friedlander said.

Most recently, insurance rating agency Demotech announced that it had withdrawn its financial stability rating for Southern Fidelity Insurance Company after the insurer placed a moratorium on writing new business and processing renewals in Florida until it secured enough reinsurance for hurricane season. When the Tallahassee, Fla.-based insurer failed to do so by the June 1 start of the season, the OIR ordered it to “wind down operations,” indicating the company could become the fourth Florida residential insurer to fail this year, following the liquidations of St. Johns, Avatar, and Lighthouse.

Auto Insurance, Business Insurance, Catastrophes, Disaster Preparedness, Disaster Resilience, ESG, Health & Safety, Homeowners Insurance, Insurers and the Economy, Market Conditions, Risk Management

Report: Policyholders See Climate as a ‘Primary Concern’

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By Max Dorfman, Research Writer, Triple-I (06/08/2022)

Nearly three-quarters of property and casualty policyholders consider climate change a “primary concern,” and more than 80 percent of individual and small-commercial clients say they’ve taken at least one key sustainability action in the past year, according to a report by Capgemini, a technology services and consulting company, and EFMA, a global nonprofit established by banks and insurers.

Still, the report found not enough action is being taken to combat these issues, with a mere 8 percent of insurers surveyed considered “resilience champions,” which the report defined as possessing “strong governance, advanced data analysis capabilities, a strong focus on risk prevention, and promote resilience through their underwriting and investment strategies.”

The report emphasizes the economic losses associated with climate, which it says have grown by 250 percent in the last 30 years. With this in mind, 73 percent of policyholders said they consider climate change one of their primary concerns, compared with 40 percent of insurers.

The report recommended three policies that could assist in creating climate resiliency among insurers:

  • Making climate resilience part of corporate sustainability, with C-suite executives assigned clear roles for accountability;
  • Closing the gap between long-term and short-term goals across a company’s value chain; and
  • Redesigning technology strategies with product innovation, customer experience, and corporate citizenship, utilizing advancements like machine learning and quantum computing

“The impact of climate change is forcing insurers to step up and play a greater role in mitigating risks,” said Seth Rachlin, global insurance industry leader for Capgemini. “Insurers who prioritize focus on sustainability will be making smart long-term business decisions that will positively impact their future relevance and growth. The key is to match innovative risk transfers with risk prevention and assign accountability within an executive team to ensure goals are top of mind.”

A global problem

Recent floods in South Africa, scorching heat in India and Pakistan, and increasingly dangerous hurricanes in the United States all exemplify the dangers of changing climate patterns. As Efma CEO John Berry said, “While most insurers acknowledge climate change’s impact, there is more to be done in terms of demonstrative actions to develop climate resiliency strategies. As customers continue to pay closer attention to the impact of climate change on their lives, insurers need to highlight their own commitment by evolving their offerings to both recognize the fundamental role sustainability plays in our industry and to stay competitive in an ever-changing market.”

Data is key

The report says embedding climate strategies into their operating and business models is essential for “future-focused insurers,” but it adds that that requires “fundamental changes, such as revising data strategy, focusing on risk prevention, and moving beyond exclusions in underwriting and investments.”

The report finds that only 35 percent of insurers have adopted advanced data analysis tools, such as machine-learning-based pricing and risk models, which it called “critical to unlocking new data potential and enabling more accurate risk assessments.”

Homeowners Insurance

Dog-Related Injury Claims Nearly $900 Million in 2021

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Despite relaxation of pandemic-related restrictions, behavioral issues in pets and rising costs persist.

By Loretta Worters, Vice President, Media Relations, Triple-I

As pet owners return to the workplace or school, pets will be left home alone. Behavioral issues such as separation anxiety could result in aggressive and destructive behavior. This could be a problem for dogs that were adopted during the pandemic as well as pets that have become used to their pet owners being at home.

March 2020 had the most dog-related injury claims, when people first went into lockdown at the start of the COVID-19 pandemic, according to State Farm. Dog bites were up 21.6 percent from the previous March, likely due to dogs dealing with owner stress, disruption in routines and more people around the house throughout the day. With the easing of restrictions for activities outside the home—experts feared it would lead to another spike in bites.  The overall number of claims slightly increased to 17,989 in 2021 from 17,567 in 2020, accounting for more than one-third of all homeowners liability claims paid out, costing $881 million.

Dog bite-related claims costs have been climbing for years. The average cost per claim nationally has risen 39 percent from 2012 to 2021, due to increased medical costs and the upward trend in the size of settlements, judgments, and jury awards.

Claims costs are attributable not only to dog bites but also to dogs knocking down children, cyclists, and the elderly, which can result in costly injuries.

The latest Triple-I dog bite claim figures are released in conjunction with National Dog Bite Prevention Week, an event held each year to help reduce the number of dog bites.

Children are particularly at risk for dog bites and are more likely to be severely injured, so it’s essential for parents to teach their kids to be safe around strange dogs and their own pets.

Dog training is, of course, key to preventing dog bites and related injuries for everyone, and National Dog Bite Prevention Week’s organizers offer many practical tips. This year, dog experts are again focused on re-socializing animals that have been isolated along with their humans.

Triple-I recommends that you check your homeowners or renters insurance policy to be sure it covers liability for dog bites and related injuries. Click here for more details about dog bite liability insurance.

Related content:

Infographic: National Dog Bite Prevention Week

Spotlight on dog bite liability

Facts about pet insurance

Auto Insurance, Corporate Social Responsibility, ESG, Homeowners Insurance, Regulation

Actuaries Tackle Race in Insurance Pricing

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The Casualty Actuarial Society (CAS) has developed a series of papers examining the issue of race and insurance pricing and seeking to contribute constructively to the policy discussion around it.

“Insurance pricing is a high-wire act,” CAS says.  Actuaries have to quantify and differentiate among a massive variety of risk variables while avoiding unfair discrimination. “As regulation and society’s understanding of discrimination evolve, however, it is necessary for us to keep abreast of changes in the manner in which discrimination is defined and adjudicated.”

The CAS research has generated four papers – two published this week, two more to be published on March 31 – that define, quantify, and propose methods for addressing unfair discrimination where it is found to exist.

Confusion around insurance rating is understandable, given the complex predictive models being used today, which can lead to inappropriate comparisons and inaccurate conclusions. Algorithms and machine learning hold great promise for helping to ensure equitable pricing. However, research has shown these tools also can amplify biases that manage to creep into their programming.

Recent Colorado legislation requires insurers to show that their use of external data and complex algorithms don’t discriminate against protected classes, as well as other state and federal efforts to address perceived bias in pricing.

The actuarial discipline and the insurance industry are well positioned to continue helping policymakers and corporate decisionmakers understand and address these inequities.

The CAS papers published this week are:

Methods for Quantifying Discriminatory Effects on Protected Classes in Insurance

Approaches to Address Racial Bias in Financial Services: Lessons for the Insurance Industry

Disaster Preparedness, Disaster Resilience, Earthquakes, Homeowners Insurance

Earthquakes:You Can’t Predict Them, But You Can Prepare

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By Max Dorfman, Research Writer, Triple-I

“Neither the United States Geological Survey (USGS) nor any other scientists have accurately predicted a major earthquake,” according to a recent post in the California Residential Mitigation Program (CRMP) blog. “And scientists do not expect to be able to predict earthquakes in the future. However, USGS scientists can calculate the probability  that a significant earthquake will occur in a specific area within a certain number of years.”

CRMP is a joint powers authority formed by its members, the California Earthquake Authority and the California Governor’s Office of Emergency Services.

Forecasting earthquakes directly before they occur is not possible – and the risk of a large earthquake remains high. With more than 15,000 known faults in California – more than 500 categorized as “active” – and most Californians living within 30 miles of an active fault, no one in the Golden State is immune to earthquake risk. 

With this in mind, the United States government has been working toward greater quake preparedness. The USGS recently released a report, UCERF3: A New Earthquake Forecast for California’s Complex System,projecting a 93 percent probability of one or more magnitude 6.7 quake or greater hitting Southern California over the  30-year period that began  in 2014. Additionally, the USGS predicts that, over the same period, there is more than a 99 percent chance of at least one magnitude 6.7 or greater earthquakes occurring in all of California.

What can you do to prepare?

ShakeAlert is a tool that helps Californians provide an initial alert concerning an imminent tremor. This early warning system delivers information that on earthquakes moments after it is begun, such as the expected intensity of ground shaking, and warning people who may be affected.

Additionally, retrofitting older homes – particularly those built before 1980, which predate modern seismic building codes – can help create more quake-resistant and resilient residences. Indeed, U.S. Census data found that than 53 percent of the housing units in San Diego County fall into that category.

As wildfires and other climate-related events continue to capture headlines, it’s important that homeowners and businesses in quake-prone areas do not neglect earthquake preparation. Most standard homeowners and renters insurance don’t cover most earthquake damage. However, with the right tools and information, people can better prepare for tremors, keeping themselves and their homes safe.

Catastrophes, Homeowners Insurance, Market Conditions

Triple-I Brief Explains Rising Homeowners’ Insurance Premium Rates

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Homeowners’ insurance premium rates have risen significantly since the pandemic and are likely to keep increasing. It’s important for consumers and policymakers to understand why this is happening and why it’s likely to continue, so Triple-I has published an Issues Brief on the topic.

From 2017 through 2021, premium rates are up 12.2 percent on average nationwide, according to S&P Global Market Intelligence data. Much of this can be attributed to pandemic-related supply-chain issues and labor shortages driving up the cost of home repairs and replacement.

But, as the Issues Brief shows, longer-term trends are in play – most significantly, more than 40 years of rising natural catastrophe losses. Average insured cat losses are up approximately 700 percent since the 1980s, due in part to increased frequency and intensity of events and to population shifts into disaster-prone regions. The brief cites U.S. Census Bureau data showing that the number of housing units in the United States has increased most dramatically since 1940 in areas most vulnerable to weather and climate-related damage.

It also shows that homeowners’ insurance premium rates have generally trailed increases in home replacement costs.  As a result, homeowners’ coverage has been an unprofitable business line for insurers in recent years – an unsustainable long-term trend that has been exacerbated by the pandemic’s disruption of the supply chain and the global economy.

Learn More

Flood: Beyond Risk Transfer

Hurricane Season: More Than Just Wind and Water

Fighting Wildfires With Innovation

Facts + Statistics: Homeowners’ and Renters’ Insurance

For even more resources, check out Triple-I’s Resilience Accelerator.

Homeowners Insurance, Insurers and the Economy

Homeowners Premiums Rise Faster Than Inflation; Expect This to Continue

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Homeowners insurance premium rates are rising faster than inflation, S&P Global Market Intelligence data shows, and Triple-I’s chief insurance officer says they’re likely to keep climbing.

From 2017 through 2020, premium rates are up 11.4 percent on average countrywide, according to S&P. Recent factors include rising material costs and supply-chain disruptions that are driving up home-replacement costs — and insurers are adjusting premiums accordingly. The countrywide average annual premium has increased to $1,398 in 2021.

“From everything I know about homeowners’ risk, I expected those numbers to be higher,” Triple-I’s Dale Porfilio told the Washington Post. “Honestly, I would say they still should go up further.”

Most mortgage lenders require borrowers to carry homeowners insurance. According to a recent Bankrate.com analysis, the average homeowner spends about 1.91 percent of household income on home insurance. Location often drives costs up, particularly if the house is in an area prone to natural disasters. Some areas have higher rates because it costs more to rebuild a house there.

Porfilio said insured damage from tornados, hurricanes, severe storms, wildfires and other natural disasters has reached $82 billion in 2021, bringing the total from 2017 through 2021 to more than $400 billion. As the chart below shows, average insured natural catastrophe losses have increased nearly 700 percent since the 1980s.

“Climate risk is continuing to put pressure on all things weather-related,” Porfilio said. “We are seeing more severe hurricanes, more severe wildfires, and the science isn’t as clear on tornado events in terms of whether they’re changing in frequency or not. But what we definitely do know is that severity is going up.”

When a natural disaster affects a wide area, the demand for materials and labor puts pressure on prices.

On top of the extreme-weather and population shifts that have been driving up insurers’ costs and, in turn, policyholders’ premiums, add the impacts of the pandemic-driven supply-chain disruptions.

“When the pandemic hit, lumber producers feared a repeat of the Great Recession,” the Washington Post reported. “They cut production and unloaded inventory. But demand soared, catching them by surprise. The price of lumber spiked to $1,500 per thousand feet of board in March, a 400 percent year-over-year increase.”

Homeowners can find recommendations for lowering their homeowners insurance costs on Triple-I’s website.

Disaster Preparedness, Disaster Resilience, Homeowners Insurance

Insurer Declined to Renew your Homeowners Policy? You Have Options

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By Maria Sassian, Triple-I consultant

In high-risk areas like the West Coast with its wildfires and Florida with its hurricanes and floods, insurance non-renewals are on the rise as insurers attempt to limit their exposure to future losses. Homeowners insurance protects your most valuable possession, so the prospect of getting a notice that your policy will not be renewed can be nerve-racking.  

But don’t panic if that happens – you have options.

Know the difference between cancellation and non-renewal

There is a big difference between an insurance company canceling a policy and choosing not to renew it. Insurance companies can’t cancel a policy that has been in force for more than 60 days except when:

Nonrenewal is a different matter. Either you or your insurance company can decide not to renew the policy when it expires. Depending on the state you live in, your insurance company must give you a certain number of days’ notice and explain the reason for not renewing before it drops your policy.

Question the non-renewal

If you think the reason the insurance company provided for non-renewing is unfair or want a further explanation, call the company.  You may get an opportunity to keep your coverage by verifying that you’ve taken risk mitigation measures such as replacing the roof or removing flammable materials near your house.

If your policy isn’t renewed because of a failed inspection, making the proper updates could help you maintain coverage.

Shop around for another policy

If your insurer insists on non-renewing, shop around for a new policy. Here are some tips from Triple-I’s How to Save Money on Your Homeowners Insurance guide:

  • Ask friends and relatives for recommendations for insurers and then do your due diligence.
  • Contact the state insurance department to find out whether they make available consumer complaint ratios by company. If they do, check into the insurers you’re considering doing business with.
  • Check the financial health of prospective insurance companies by using ratings from independent rating agencies and consulting consumer magazines for reviews.
  • For price quotes, call companies directly or access information online. Your state insurance department may also provide comparisons of prices charged by major insurers.
  • Get quotes from at least three companies.
  • Don’t shop based on price alone. Remember, you’ll be dealing with this company in the event of an accident or other emergency. When you need to file a claim you’ll want an insurer that provides good customer service, so test that while you’re shopping, and choose a company whose representatives take the time to address your questions and concerns.

Explore your state’s shared market option

If you’ve shopped around and can’t find coverage, you may need to turn to the state-run shared market. Many states offer Fair Access to Insurance Requirements (FAIR) policies for high-risk homes, or beach and windstorm plans for coastal properties. These policies offer limited coverage and are often more expensive than a standard home policy from a private insurer.

For more comprehensive coverage, homeowners in California may purchase a “difference in conditions” policy that complements FAIR Plan coverage.

Look into surplus lines

The surplus lines market, which is comprised of highly specialized insurers, exists to provide coverage that is not available through licensed insurers in the standard market. Each state has surplus lines regulations and each surplus lines company is overseen for solvency by its home state.

Available surplus lines companies vary by state. Speak with an insurance agent or broker about surplus lines if you’ve been rejected by at least three other insurers.

Non-renewals in disaster-prone areas

 State regulators are pushing back against the non-renewal trend by placing moratoriums on non-renewals for certain zip codes, as happened in California recently, or for certain companies, as is the case in Louisiana.

Whether the decision not to renew is yours or your insurer’s, don’t put off shopping for a new policy. You don’t want coverage on your home to lapse.

Catastrophes, Disaster Preparedness, Disaster Resilience, Flood Insurance, Floods, Homeowners Insurance

Relocated Due to Ida? You Might Be Covered for Additional Living Expenses

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Standard homeowners and renters insurance policies include additional living expenses (ALE) coverage. ALE pays the costs of living away from home—above and beyond your customary expenses— if you cannot live at home due to damage caused by an insured event that makes the home temporarily uninhabitable.

What expenses are typically covered by ALE?

ALE covers living expenses incurred by you so your household can maintain its normal standard of living.  These expenses could include:

  • Temporary housing
  • Moving costs
  • Grocery or restaurant bills 
  • Storage costs
  • Laundry expenses
  • Transportation (e.g., if your temporary home requires a longer commute)
  • Parking fees
  • Pet boarding

Your homeowners policy’s ALE coverage is usually equal to 20 percent of your home’s insured value—a home insured for $200,000, for instance, may have ALE coverage of up to $40,000—or limited to a certain timeframe (e.g., no more than 12 months).

What about Damage from Hurricane Ida?

Standard ALE coverage should be triggered if damage from a covered peril (e.g., wind and rain) caused the home to be uninhabitable. In addition, some companies provide ALE coverage when policyholders leave their home or apartment due to mandatory evacuation orders. Policyholders should speak with their insurance professional to confirm whether their policy provides ALE coverage for their situation.

As a reminder, standard homeowners insurance policies typically do not provide coverage for flood damage. The National Flood Insurance Program (NFIP) covers physical damage from flood but does not include ALE. Some privately sold flood policies offer ALE following flood losses. 

What Other Help Is Available?

Federal assistance has been made available through the Federal Emergency Management Agency (FEMA). On September 2, FEMA announced they will cover hotel expenses for survivors of Hurricane Ida with damaged homes or dwellings in 25 parishes in southeast Louisiana.

The program, known as Transitional Sheltering Assistance, will provide survivors with short-term housing free-of-charge as they recover from the Category 4 storm. Survivors must first register with FEMA at disasterassistance.gov or by calling the FEMA helpline at 800-621-3362. Those wishing to take advantage of the program must find and book their own hotel rooms. Participating hotels are listed at www.femaevachotels.com.