Trends in Homeowners Insurance Claims · 2016-06-09 · 11/4/2014 3 Trends in Homeowners Insurance Claims-2.6% 7.8% Frequency Severity Annualized Change 1997-2013 45% 5% Frequency

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Trends in Homeowners Insurance Claims

Center for Insurance Policy & ResearchOctober 7, 2014


• Homeowners claim trends countrywide• Average claim payment per insured home• Frequency• Severity

• The role of catastrophes

• Volatility

• Individual state trends and differences

• Data

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$229

$625

$442

1997 1999 2001 2003 2005 2007 2009 2011 2013

Average HO Claim Payment per Insured HomeAll 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 & SeverityAll Claims, All Policy Forms Combined, Countrywide

average payment per paid claimnumber of claims paid per 100 insured homes


8.6

$2,676

$8,787

5.0

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-2.6%

7.8%

Frequency Severity

Annualized Change1997-2013

45%

5%

Frequency Severity

Volatility Index 1997-2013

Homeowners ClaimsAll Claims, All Policy Forms Combined, Countrywide


2.4%

5.0%

7.8%7.1%

CPI HO claimpayment perinsured home

HO claimseverity

Preparedasphalt and tar

roofing andsiding

Annualized Change1997-2013

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…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 ComponentAll Policy Forms Combined, Countrywide

claims excluding catastrophes

catastrophe-related claims


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$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 CatastrophesAll 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 2013claim severity claim frequency

number of paid claims per 100 insured homes average payment per paid claim

Claim Frequency & Severity, Catastrophe ClaimsAll Policy Forms Combined, Countrywide


1.5

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1.3%

-4.6%

Cat Non Cat

Claim Frequency7% 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


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$1,743

$218

$0 $500 $1,000 $1,500 $2,000

OklahomaMississippiNebraskaColoradoLouisiana

TexasIllinoisFlorida

PennsylvaniaVirginia

MaineDelaware

HawaiiUtah

Oregon

HO Claim Payment per Insured Home in 2013All Claims, All Policy Forms Combined



Average Claim Payment per Insured Home, 2009-2013

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0.5%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



Annualized Growth in Average Payment per Insured Home 1997-2013

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$0

$200

$400

$600

$800

$1,000

$1,200

1997 1999 2001 2003 2005 2007 2009 2011 2013Minnesota Oregon

Average Claim Payment per Insured Home

Volatility Index=94%

Volatility Index=50%



Volatility of Average Claim Payment per Insured Home1997-2013

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$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 2013Noncatastrophe claims Catastrophe claims

Average Claim Payments per Insured HomeAll Policy Forms Combined

Colorado Fourmile Canyon wildfire and 2 other events

4 PCS-designated catastrophe events



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




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$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



MississippiHurricanes Cindy, Katrina, Rita,

and 5 other PCS-designated catastrophe events


$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


Average Claim Payment per Insured HomeAll Policy Forms Combined

Florida

Hurricanes Charley, Frances, Jeanne and Ivan

Hurricanes Dennis, Katrina, Rita, Wilma and 1 other PCS-designated catastrophe event

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$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 2011Noncatastrophe-related Catastrophe-related

Average Claim Payment per Insured HomeAll Policy Forms Combined

Texas7 PCS-designated

catastrophe eventsHurricanes Dolly,

Ike and 9 other PCS-designated

catastrophe events

Bastrop wildfire


$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


Average Claim Payment per Insured Home All Policy Forms Combined

California


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Percentage of Total Claim Payments Attributed to Catastrophes2009-2013

• 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


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Center for Insurance Policy & ResearchOctober 7, 2014

Documents

Trends in Homeowners Insurance Claims · 2016-06-09 · 11/4/2014 3 Trends in Homeowners Insurance Claims-2.6% 7.8% Frequency Severity Annualized Change 1997-2013 45% 5% Frequency