Trends in Homeowners Insurance Claims
Center for Insurance Policy & Research
October 7, 2014
Trends in Homeowners Insurance Claims
• Homeowners claim trends countrywide
• Average claim payment per insured home • Frequency
• Severity
• The role of catastrophes • Volatility
• Individual state trends and differences
$229
$625
$442
1997 1999 2001 2003 2005 2007 2009 2011 2013
Average HO Claim Payment per Insured Home All Claims, All Policy Forms Combined, Countrywide
Annualized Growth Rate = 5.0% Volatility Index=21%
$0 $2,000 $4,000 $6,000 $8,000 $10,000 0.0 2.0 4.0 6.0 8.0 10.0 12.0 1997 1999 2001 2003 2005 2007 2009 2011 2013 claim severity claim frequency
HO Claim Frequency & Severity
All Claims, All Policy Forms Combined, Countrywide
average payment per paid claim number of claims paid per 100 insured homes
Trends in Homeowners Insurance Claims
8.6
$2,676
$8,787
-2.6% 7.8% Frequency Severity Annualized Change 1997-2013 45% 5% Frequency Severity Volatility Index 1997-2013 Homeowners Claims
All Claims, All Policy Forms Combined, Countrywide
Trends in Homeowners Insurance Claims
2.4% 5.0% 7.8% 7.1% CPI HO claim payment per insured home HO claim
severity asphalt and tarPrepared roofing and
siding Annualized Change
…the prices for all asphalt products have risen significantly. The cokers installed by many refiners allow them to refine oil in ways that have changed the oil/asphalt dynamic forever… the use of cokers means there’s less flux left at the end of the oil refining process, resulting in higher costs to the shingle manufacturer.
…storm-related reroofing now represents a greater percentage of the roofing market. The unpredictable nature of extreme weather events makes it much harder for manufacturers to anticipate demand, often resulting in severe regional shortages of asphalt shingles.
Midwest Roofing Contractors Association
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1997 1999 2001 2003 2005 2007 2009 2011 2013
HO Claim Payments by Catastrophe Component All Policy Forms Combined, Countrywide
claims excluding catastrophes
catastrophe-related claims
$0 $2,000 $4,000 $6,000 $8,000 $10,000 0 2 4 6 8 10 12 1997 1999 2001 2003 2005 2007 2009 2011 2013
claim severity claim frequency
number of claims paid per 100 insured homes average payment per paid claim
Claim Frequency & Severity, Excluding Catastrophes
All Policy Forms Combined, Countrywide
7.0 $2,709 $8,772 3.5 $2,529 $8,823 1.6 $0 $2,000 $4,000 $6,000 $8,000 $10,000 0 2 4 6 8 10 12 1997 1999 2001 2003 2005 2007 2009 2011 2013 claim severity claim frequency
number of paid claims per 100 insured homes average payment per paid claim
Claim Frequency & Severity, Catastrophe Claims All Policy Forms Combined, Countrywide
Trends in Homeowners Insurance Claims
1.3%
-4.6%
Cat Non Cat Claim Frequency
7% 8%
Cat Non Cat Claim Severity
Annualized Change (1997-2013)
Volatility Index (1997-2013)
95%
25%
Cat Non Cat Claim Frequency
20%
2%
Cat Non Cat Claim Severity
State Trends
• Absolute costs • Cost growth • Role of catastrophes • Volatility$1,743 $218 $0 $500 $1,000 $1,500 $2,000 Oklahoma Mississippi Nebraska Colorado Louisiana Texas Illinois Florida Pennsylvania Virginia Maine Delaware Hawaii Utah Oregon
HO Claim Payment per Insured Home in 2013
All Claims, All Policy Forms Combined
Trends in Homeowners Insurance Claims
Average Claim Payment per Insured Home, 2009-20130.5% 1.8% 2.3% 2.7%
5.0%
8.5% 9.7%
12.6% 12.7%
HO Claim Payment per Insured Home Annualized Growth Rates, 1997-2013
Trends in Homeowners Insurance Claims
Annualized Growth in Average Payment per Insured Home$0 $200 $400 $600 $800 $1,000 $1,200 1997 1999 2001 2003 2005 2007 2009 2011 2013 Minnesota Oregon
Average Claim Payment per Insured Home
Volatility Index=94%
Volatility Index=50%
Trends in Homeowners Insurance Claims
Volatility of Average Claim Payment per Insured Home$291 $204$273$205$261 $284 $269 $417 $250 $247 $361$399 $919 $827 $638 $936 $698 1997 1999 2001 2003 2005 2007 2009 2011 2013 Noncatastrophe claims Catastrophe claims
Average Claim Payments per Insured Home All Policy Forms Combined
Colorado Fourmile Canyon wildfire and 2 other events 4 PCS-designated
catastrophe events
Average Claim Payments per Insured Home All Policy Forms Combined
Oklahoma $262$349 $893 $466 $511 $407 $484$541$370 $363$506 $1,319$1,279 $1,673 $977$1,119 $1,743 1997 1999 2001 2003 2005 2007 2009 2011 Noncatastrophe-related Catastrophe-related 3 PCS-designated catastrophe events 10 PCS-designated catastrophe events
$255 $703 $372 $304 $536 $390 $474 $344 $4,427 $1,762 $1,456 $903 $654 $721 $774 $555 $1,081 1997 1999 2001 2003 2005 2007 2009 2011 2013 Noncatastrophe-related Catastrophe-related
Average Claim Payments per Insured Home All Policy Forms Combined
Mississippi Hurricanes Cindy, Katrina, Rita,
and 5 other PCS-designated catastrophe events
Trends in Homeowners Insurance Claims
$170 $189 $185 $184 $235 $244 $258 $1,946 $1,349 $777 $425 $494 $497 $507$555 $538 $462 1997 1999 2001 2003 2005 2007 2009 2011 2013 Noncatastrophe-related Catastrophe-related
Average Claim Payment per Insured Home All Policy Forms Combined
Florida Hurricanes Charley, Frances,
Jeanne and Ivan
Hurricanes Dennis, Katrina, Rita, Wilma and 1 other PCS-designated catastrophe event
$340 $344 $365 $591 $745 $914 $606 $275 $374$332 $337 $1,026 $870 $555 $794 $634 $551 1997 1999 2001 2003 2005 2007 2009 2011 Noncatastrophe-related Catastrophe-related
Average Claim Payment per Insured Home All Policy Forms Combined
Texas 7 PCS-designated
catastrophe events
Hurricanes Dolly, Ike and 9 other PCS-designated catastrophe events
Bastrop wildfire
Trends in Homeowners Insurance Claims
$266 $280 $267 $266 $325 $349 $395 $343 $286 $262 $455 $440 $312$363 $348 $352 $355 1997 1999 2001 2003 2005 2007 2009 2011 2013 Noncatastrophe-related Catastrophe-related
Average Claim Payment per Insured Home All Policy Forms Combined
California 3 PCS-designated catastrophe events
Percentage of Total Claim Payments Attributed to Catastrophes 2009-2013
• Overall countrywide trends
• Loss costs trending up 5% annually
• Decreasing, but volatile, claim frequency overall • Rapid increase in claim severity
• Volatility is primarily a function of the frequency of catastrophe-related claims
• Substantial differences across states
• In a given year, loss costs can vary by a factor of 8 • Modeled growth rates vary even more
• Volatility due primarily, but not entirely, to catastrophe claims
• Limitations of linear trend