Category Archives: Homeowners 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.

Catastrophes, Coastal Property, Disaster Resilience, Flood Insurance, Floods, Homeowners Insurance

After Ida: Stay Safe and Report Damage Quickly

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“Stay informed, stay safe, and contact your insurance professional as soon as possible.”

The Insurance Information Institute is working with insurers in the aftermath of Hurricane Ida to monitor property damages and assist consumers as they recover. In this video, Triple-I CEO Sean Kevelighan provides guidance for homeowners to help them ensure a smooth claims experience and avoid being taken advantage of by unethical contractors and other scammers who tend to emerge after disasters.

“Right now, the most important thing those impacted by Ida can do is remain safe and stay out of the way out of recovery workers,” Kevelighan says. “The storm may have passed, but remember that new dangers may be lurking.”

In particular, he points to threats from downed electrical wires and washed-out roads and bridges. Kevelighan also emphasizes the importance of quickly reporting property damage to your insurer.  

Other resources:

Hurricanes: Insurance and recovery resources

After a hurricane, beware of the dangers that remain

When disaster strikes: Preparation, response and recovery

Health safety following a flood

Recovering from a flood

Catastrophe-related fraud

Health & Safety, Homeowners Insurance

Independence Day Summer Fun Also Carries Risks

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

Independence Day is associated with fireworks displays, barbeques, and poolside parties, yet even summer fun carries risks.

Here are four summertime liability risks you should be aware of and recommendations on what you can do to protect yourself:

FIREWORKS: Fireworks may be a Fourth of July tradition, but they can also cause either injuries or fires. More than one of every four (28 percent) fireworks-caused fires nationwide each year occur on the Fourth of July, according to the National Fire Protection Association (NFPA.) In recognition of Fireworks Safety Awareness Week (June 28-July 4), the Triple-I encourages everyone to follow federal fireworks laws and local fireworks laws. 

GRILLS: About four out of five (79 percent) grilling fires involve gas grills, according to the U.S. Fire Administration (USFA). Patios, terraces, and screened-in porches are the leading home locations for grill fires, the USFA has found. The NFPA reports an average of 8,900 home fires are started by grills each year, with numbers peaking during the month of July. Grill-related fires can damage your house, outdoor possessions and structures and cause injuries to guests. The latter could result in a lawsuit.

POOLS: Drowning is the leading cause of unintentional death among children aged one to four years old and, between 2016 and 2018, 83 percent of these tragedies occurred at residential pools, according to the U.S. Consumer Product Safety Commission reported. In addition, non-fatal pool and diving board accidents can leave victims with long-term health issues.

ALCOHOL: Social host liability laws vary widely but 40-plus states have them on the books. Most of these laws offer an injured person a method to sue the person who served them alcohol while on their premises. Criminal charges may also apply under some social host liability laws.

Any of these scenarios pose a liability risk, so homeowners are advised to review their insurance policies to understand their policy’s liability limits. A liability limit of at least $300,000 is often a cost-effective step to take in consultation with an insurance professional.

In addition, consider adding an umbrella liability policy, which provides liability protection over and above current coverage. 

Homeowners Insurance, Lightning

Cost of Lightning-Caused Claims Soared Due to 2020’s U.S. Wildfires

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

For the fourth consecutive year, the number of lightning-caused U.S. homeowners insurance claims decreased in 2020, even as the average value of those claims has more than doubled since 2017, according to Triple-I’s analysis of national insurance claims data. 

Lightning-related homeowners insurance claim costs nationally rose dramatically due to a series of lightning strikes across Northern California in 2020.  The average cost per lightning claim in California was $217,555 in 2020, while the national average for this type of claim was nearly $29,000.

Triple-I also found that:

  • More than $2 billion in lightning-caused U.S. homeowners insurance claims were paid out in 2020 to 71,000-plus policyholders
  • The average cost of a lightning-caused U.S. homeowners insurance claim increased 141 percent between 2019 and 2020 (from $11,971 to $28,885) and 168 percent from 2017 to 2020 (from $10,781 to $28,885)
  • The average number of lightning-caused U.S. homeowners insurance claims decreased by nearly 7 percent between 2019 and 2020 (from 76,860 to 71,551)

The wildfires in California and elsewhere damaged homes which had to be either repaired or rebuilt with more expensive construction materials. The National Association of Home Builders reported that, between mid-April and mid-September 2020, lumber prices soared more than 170 percent nationwide, adding $16,148 to the price of a typical, new single-family home.

The August Complex Fire, started by lightning strikes in August 2020, was the largest in California’s history, as defined by acres burned, according to the California Department of Forestry and Fire Protection (CAL FIRE). It spread across 1 million acres and impacted seven counties.

State-by-State Numbers

Florida – which has the most thunderstorms— remained the top state for lightning-caused homeowners insurance claims in 2020, with 6,756, followed by Georgia (4,686), Texas (4,675), and California (4,233).

Homeowners Insurance Coverage

Damage caused by lightning, which results in a fire, is covered under standard homeowners insurance policies.  Some policies provide coverage for power surges that are the direct result of a lightning strike, which can cause severe damage to appliances, electronics, computers and equipment, phone systems, electrical fixtures and the electrical foundation of a home.

In recognition of Lightning Safety Awareness Week, June 20-26, the Triple-I and the Lightning Protection Institute (LPI), a national organization that establishes standards for specifying and installing lightning protection systems and promotes lightning safety, encourage homeowners to install  lightning protection systems in their homes. 

“When we think of lightning safety, we should make a distinction between personal safety and property protection,” said Tim Harger, LPI’s Executive Director.  “Personal safety is what we do during a storm and the safest place in any lightning event is within a structure protected by a properly designed, inspected and certified lightning protection system,” he said.  “Installing lightning protection systems in our homes or businesses is an action we can take before a storm that can mitigate against property damage.”